Table of Contents

As filed with the Securities and Exchange Commission on July 13, 2020.

Registration No. 333-239487

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

AMENDMENT NO. 1 TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

BERKELEY LIGHTS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware    3826    35-2515390

(State or other jurisdiction of

incorporation or organization)

  

(Primary Standard Industrial
Classification Code Number)

5858 Horton Street, Suite 320
Emeryville, California 94608
(510) 858-2855

   (I.R.S. Employer
Identification No.)

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

 

Eric D. Hobbs, Ph.D. Chief Executive Officer

5858 Horton Street, Suite 320 Emeryville, California 94608 (510) 858-2855

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

Copies to:

 

Brian J. Cuneo

Alexander White

Latham & Watkins LLP

140 Scott Drive

Menlo Park, California 94025

(650) 328-4600

 

Shaun M. Holt

Chief Financial Officer

5858 Horton Street, Suite 320

Emeryville, California 94608

(510) 858-2855

 

Alan F. Denenberg

Emily Roberts

Davis Polk & Wardwell LLP

1600 El Camino Real

Menlo Park, California 94025

(650) 752-2000

 

 

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer      Accelerated filer  
Non-accelerated filer      Smaller reporting company  
   Emerging growth company  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.  

 

 

CALCULATION OF REGISTRATION FEE

 

 

 

Title of each class of securities to be registered  

Amount to be  

Registered(1)

 

Proposed Maximum  

Aggregate Offering
Price Per Share

 

Proposed Maximum  

Aggregate
Offering Price(2)

 

Amount of

Registration Fee(3)  

Common Stock, $0.00005 par value per share

  8,510,000   $18.00   $153,180,000   $19,883

 

 

(1)   Includes 1,110,000 shares of common stock that the underwriters have the option to purchase.
(2)   Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended.
(3)   The registrant previously paid a total of $12,980 in connection with the previous filing of the registration statement. In accordance with Rule 457(a), an additional registration fee of $6,903 is being paid with this amendment to the registration statement.

 

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 

 

 


Table of Contents

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

 

Subject to completion, dated July 13, 2020

Preliminary prospectus

7,400,000 shares

 

 

LOGO

Berkeley Lights, Inc.

Common stock

This is the initial public offering of shares of common stock by Berkeley Lights, Inc. We are offering 7,400,000 shares of our common stock. The estimated initial public offering price is between $16.00 and $18.00 per share.

Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the Nasdaq Global Market under the trading symbol “BLI.”

We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and may elect to do so in future filings.

 

     
      Per share        Total  

Initial public offering price

   $                      $                

Underwriting discounts and commissions(1)

   $          $    

Proceeds to Berkeley Lights, Inc. before expenses

   $          $    

 

 

 

(1)   See “Underwriting” for a description of the compensation payable to the underwriters.

We have granted the underwriters an option for a period of 30 days from the date of this prospectus to purchase up to 1,110,000 additional shares of common stock at the initial public offering price, less the underwriting discounts and commissions.

Investing in our common stock involves a high degree of risk. See “Risk factors” beginning on page 17 to read about factors you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any other state securities commission has approved or disapproved of these securities or passed on the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares against payment in New York, New York on                , 2020.

 

J.P. Morgan   Morgan Stanley   Cowen
William Blair

Prospectus dated     , 2020


Table of Contents

Table of contents

 

     Page  

Prospectus summary

     1  

Risk factors

     17  

Special note regarding forward-looking statements

     62  

Market, industry and other data

     64  

Use of proceeds

     65  

Dividend policy

     66  

Capitalization

     67  

Dilution

     69  

Selected consolidated financial data

     72  

Management’s discussion and analysis of financial condition and results of operations

     76  

Business

     101  

Management

     137  

Executive compensation

     148  

Certain relationships and related party transactions

     160  

Principal stockholders

     164  

Description of capital stock

     167  

Shares eligible for future sale

     172  

Material U.S. federal income tax consequences to Non-U.S. Holders

     175  

Underwriting

     179  

Legal matters

     190  

Experts

     190  

Where you can find more information

     190  

Index to audited consolidated financial statements

     F-1  

 

 

We have not, and the underwriters have not, authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

Through and including                , 2020 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

For investors outside the United States: Neither we nor any of the underwriters have taken any action that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons who have come into possession of this prospectus in a jurisdiction outside the United States are required to inform themselves about and to observe any restrictions relating to this offering and the distribution of this prospectus.


Table of Contents

Prospectus summary

The following summary highlights information contained elsewhere in this prospectus. This summary is not complete and does not contain all of the information you should consider in making your investment decision. Before investing in our common stock, you should read this entire prospectus carefully, especially the sections titled “Risk factors,” “Special note regarding forward looking statements” and “Management’s discussion and analysis of financial condition and results of operations” and our consolidated financial statements and related notes included elsewhere in this prospectus. Except as otherwise indicated herein or as the context otherwise requires, references in this prospectus to “Berkeley Lights,” “the Company,” “we,” “us” and “our” refer to Berkeley Lights, Inc. and its consolidated subsidiary.

Overview

Berkeley Lights is a leading Digital Cell Biology company focused on enabling and accelerating the rapid development and commercialization of biotherapeutics and other cell-based products. The Berkeley Lights Platform captures deep phenotypic, functional and genotypic information for thousands of single cells in parallel and can also deliver the live biology customers desire in the form of the best cells. This is a new way to capture and interpret the qualitative language of biology and translate it into single-cell specific digital information, referred to as Digital Cell Biology. We currently focus on enabling the large and rapidly growing markets of antibody therapeutics, cell therapy and synthetic biology with our platform. Our goal is to establish the Berkeley Lights Platform as the standard throughout the cell-based product value chain by increasing the probability of successful product development for our customers.

Cells have tremendous capabilities and are an effective means to discover, develop and manufacture a wide range of products, including therapies for diseases, new and sustainable foods and industrial materials. Harnessing these capabilities requires finding and using the best cells, which can result in finding the next blockbuster drug or saving millions of dollars per year on manufacturing costs. However, biology is extremely complex and not deterministic. Cells are microscopic factories that make minute amounts of a variety of valuable proteins, such as antibodies, and therefore require a high degree of precision when analyzed individually. Finding the best cell can require searching through millions of cells, or often even more challenging, starting with a limited sample of precious cells. Finding the best cells requires more than just capturing a cell’s genetic code, it requires the deep understanding generated by functional characterization across many parameters, a process we call Deep Opto Profiling. Many existing methods to perform functional characterization of single cells are manual and fragmented processes that we believe do not scale to meet the significant challenges of measuring biological complexity. Furthermore, methods that characterize larger numbers of cells in bulk lack single-cell precision or operate at single-cell resolution but without functional validation of that cell. Cell-based product development requires living, functionally validated cells. We believe today’s methods functionally characterize insufficiently and too late in the process. We believe that harnessing the cell’s true capability, to develop biotherapeutics and other cell-based products, requires functional characterization of living single cells at large scale, cost effectively and in an integrated manner, early in the value chain.

We developed the Berkeley Lights Platform to provide the most advanced environment for rapid functional characterization of single cells at scale. The Berkeley Lights Platform consists of advanced automated systems that analyze live cells using proprietary consumables and application and workflow software to deliver robust single cell data. Our platform first characterizes the performance of cells relevant to the desired cell-based product early in the process and then connects this phenotypic data to the genetic code for each cell. In contrast, current genomic technologies find sequences first and fail to deliver the functional information early

 

1


Table of Contents

in the process. Performing functional validation early means letting poorly performing cells fail early, while rapidly advancing the best candidates forward, before incurring significant research and development expense. Our platform repeats this process of fail and advance many times throughout the process, delivering the best cells for what we believe will deliver the best product. We believe our platform rapidly provides the deepest information, with linked phenotypic and genotypic data, on tens of thousands of live single cells relevant to the customers’ end product specifications. We believe we are the only company exclusively focused on this approach to Digital Cell Biology, and we believe this level of scale and precision is not attainable with other approaches. This allows our customers to find the best cells by:

 

 

Performing rapid functional characterization of tens of thousands of single cells in parallel;

 

 

Precisely controlling the environment around each cell, and maintaining cells in a healthy state for further use;

 

 

Accessing a high degree of cell biodiversity;

 

 

Deep Opto Profiling of the relevant phenotypic characteristics, at single-cell resolution over time and connecting this to the genotypic information for each cell;

 

 

Performing a broad range of workflows, including single-cell assays, on an integrated platform; and

 

 

Digitally aggregating, accessing and analyzing a rich data library for each single cell.

Using our platform, customers can perform functional characterization of single cells at scale, effectively, more often and early in the product development process. We believe this enables them to find the best cells and best product candidates earlier and faster in their processes to:

 

 

Accelerate their product development cycles;

 

 

Improve process yield and lower costs throughout their value chain;

 

 

Enable a broad range of complex therapeutic modalities in biopharmaceuticals;

 

 

Increase the probability of successfully developing cell-based products;

 

 

Achieve revenue from their cell-based products sooner and potentially extend the product lifetime on the market prior to patent expiration; and

 

 

Increase return on investment for their cell-based products.

Our platform is a fully integrated, end-to-end solution, comprised of proprietary consumables, including our OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software. Customers load onto our system their live cell samples, as well as media and reagents, then the cells are imported onto our OptoSelect chips where integrated workflows are performed to assess specific cell functions and attributes. Our platform captures and delivers rich single-cell data to find the best cells. We believe this brings common biological cell processing into the digital age. Our platform leverages proprietary OptoElectro Positioning (OEP) technology, which enables deterministic positioning of living single cells and other micro-objects using light. OEP is a core technology of our platform and allows for a high level of control over live single cells or other micro-objects throughout the functional characterization process.

We estimate that the combined end market sales of cell-based products in antibody therapeutics, cell therapy and synthetic biology were $148 billion in 2019 and are expected to grow to $255 billion by 2024 at 11% CAGR.

 

2


Table of Contents

While our platform is currently utilized primarily in the discovery and development stages of the value chain and marketed as research use only, or RUO, we believe that the capabilities of our platform will enable us to capture an increasingly greater share of our addressable market opportunity and the value chain across the cell-based product industries, including being incorporated into the commercial manufacturing process. Our platform may also enable us to develop biological assets to potentially participate in revenue in the cell-based product end markets. In order to fully serve our addressable market, including being incorporated into the commercial manufacturing process of cell-based therapeutics, we must apply for and receive authorization of our products and any resulting therapies would have to receive marketing approval from the FDA and/or other regulatory agencies. In addition, we must increase the reliability of our platform and workflow yields in order to continue to penetrate these markets and scale our customer base.

We believe we have established a solid foundation, from which to drive adoption of our platform across multiple markets, and across the value chain of cell-based product companies. As of December 31, 2019, our customer base was comprised of 45 customers, which include eight of the ten largest biopharmaceutical companies in the world ranked by 2019 revenue who comprised 18% of our revenue in 2019, biotechnology companies, leading contract research organizations, synthetic biology companies and academic institutions. Many of these customers are recent adopters and we believe there is significant opportunity to expand the use of our workflows and capitalize further throughout their value chains.

We drive customer adoption globally within our initial target markets, antibody therapeutics, cell therapy and synthetic biology, through business development efforts, a direct sales and marketing organization in the United States, parts of Europe and China and third party distributors and dealers in Asia.

As of March 31, 2020, we had 210 full-time employees, including 77 employees with Ph.D. degrees.

Our revenue has to date primarily been driven by early adopters of our technology for research and development purposes. Revenue was $31.3 million and $56.7 million for the years ended December 31, 2018 and 2019, respectively, and $12.6 million and $13.8 million for the three months ended March 31, 2019 and 2020, respectively. We generated net losses of $23.3 million and $18.3 million for the years ended December 31, 2018 and 2019, respectively, and $4.2 million and $8.4 million for the three months ended March 31, 2019 and 2020, respectively.

Digital Cell Biology enabled by the Berkeley Lights Platform

The Berkeley Lights Platform is a fully integrated, end-to-end solution, comprised of proprietary consumables, including our OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software:

 

 

OptoSelect chips—Proprietary single-use opto-fluidic chips on which thousands of single cells are functionally characterized in parallel. Aided by our software, these chips use OEP to select and move thousands of cells and other micro-objects in parallel through a microfluidic circuit into individual nanoliter sized chambers we call NanoPens, located on the chips. Within the NanoPens, our platform can precisely control the environment, perform a large variety of single-cell assays and record with high resolution imaging each single cell over time, providing a predictable analytical window into live single-cell biology. Our OptoSelect chips contain up to 14,000 individual NanoPens on a single chip and are compatible with both mammalian and non-mammalian cells.

 

 

Reagent kits—Support on-chip phenotypic and genotypic single-cell assays and off-chip processes for upstream and downstream analysis and support multiple species and cell types. We also supply media and media additives for certain cell types.

 

3


Table of Contents
 

Advanced automation systems—Three advanced automation systems, Beacon and Lightning, which are designed to run our proprietary workflows, and Culture Station, which allows our customers to increase the throughput of workflows requiring high volume, multi-day cell culture. Beacon can run workflows on four chips in parallel, utilizing up to 56,000 NanoPens, while Lightning runs workflows on one chip at a time.

 

 

Advanced application and workflow software—Tailored software packages that enable customers to design, automate and scale reproducible workflows and collect, aggregate, analyze and report data on each cell in each NanoPen, far beyond what we believe is possible with current manual workflows.

We believe our platform is well suited for supporting a distributed biological processing infrastructure by leveraging automation, standardization, commercial workflows, assay libraries and deep phenotypic profiling at the single-cell level; and, in the future, all accessible via the cloud at the point of care at any location, close to the patient, around the world. In contrast to traditional highly centralized infrastructure, we believe our platform can dramatically improve the ability to respond to emerging diseases around the world where they occur.

Our workflow and assay library

Our commercial workflows, each of which are distinct offerings, are made up of four modules we call Import, Culture, Assay and Export. These modules can be adapted, interchanged and deployed with a variety of single-cell assays to address specific applications and a variety of cell types. We believe this versatility facilitates rapid development of new workflow offerings and virtually unlimited workflow commercialization opportunities. We have developed and will continue to develop and commercialize proprietary workflows across large markets by leveraging existing workflows and assays. Over time, our goal is to enable customers to standardize many of their processes on our platform utilizing our workflows. We believe we are the only company commercializing a platform that can do this in a scalable way.

To drive new workflow development, we created our Berkeley Lights BioFoundry, which we believe represents the largest single location capacity for functionally characterizing cells. In our BioFoundry, we practice and develop workflows and functional assays that are applicable throughout the value chain of our target markets. Leveraging our BioFoundry’s capacity and the precision of our platform, we can also look deep into the immune repertoire to discover difficult to find proprietary biological assets, such as antibodies and T cell receptors, or TCRs, that may offer commercialization opportunities.

We have grown our workflow library with increasing velocity since the introduction of our first workflow in December of 2016, and as of May 31, 2020, we offered six commercial workflows, incorporating sixteen assays and eleven cell classes. Our current workflows target customers in the antibody therapeutics, cell therapy and synthetic biology markets. Commonalities among certain workflows used to functionally characterize single cells in one market allow us to leverage the workflows developed for that market to improve and accelerate workflow development timelines for another market and facilitate adoption of our platform across markets.

 

LOGO

 

4


Table of Contents

LOGO

 

LOGO

The output of a workflow is to recover the best cells and best product candidates through Deep Opto Profiling by recording critical data such as relevant phenotypic characteristics, genotypic information and real-time continuous images on thousands of cells, on an individual cell basis. We believe Deep Opto Profiling delivers a significant amount of relevant phenotypic, genotypic and imaging information for each single cell, across a number of interconnected dimensions, allowing our customers to find the best cells for their desired products.

 

5


Table of Contents

Market opportunity

We believe that the capabilities of our platform will enable us to capture an increasingly greater share of the value chain across cell-based product industries, beyond target and cell identification, and drive long-term expansion of our addressable market opportunities, including being incorporated into the commercial manufacturing process. Our current workflows target customers in the antibody therapeutics, cell therapy and synthetic biology markets. We estimate that end market sales of cell-based products in antibody therapeutics, cell therapy and synthetic biology were approximately $148 billion in 2019 and are expected to grow to $255 billion by 2024 at an 11% CAGR. We believe there are approximately 1,600 companies, academic institutions, and governmental and other organizations currently focused on developing cell-based products and we estimate our total addressable market to be approximately $23 billion, which includes addressable markets of approximately $6 billion in antibody therapeutics, approximately $15 billion in cell therapy and approximately $2 billion in synthetic biology. Our estimates of our total addressable markets are based on potential customer research and development spending, addressable aspects of potential customers’ end product development process, and potential platform usage. We also utilize estimated penetration and placement rates for our platform with potential customers in our target markets and historical patterns for consumables usage.

Our platform has capabilities applicable across these large markets. The precision and scale of our platform enable the discovery of rare antibodies that might only be 1 in 100,000 cells or 1 in 1,000,000. Our advanced antibody discovery workflows can be utilized for new complex modalities such as multi-specific antibodies, as well as in the rapid discovery of antibodies for SARS-CoV-2 near the point of outbreak. We believe our ability to place our platform locally at the point of pathogen emergence increases the ability to rapidly respond to diseases as compared to being restricted to a remote, centralized response. Being in proximity to the point of care is not only important for viral response, but also for treating diseases such as cancer with autologous cell therapies.

Business model and platform access

Our business model is focused on driving the adoption of the Berkeley Lights Platform and maximizing its use across our customers’ value chains. This is achieved by enabling more functional testing of single cells throughout our customers’ value chains and by finding opportunities for customers to perform single-cell functional testing earlier in their product development process to advance better product candidates. We engage with potential customers to identify a significant challenge they are facing and then evaluate which of our workflows and underlying assays can address their problem. Customers can gain access to our platform via direct purchase, subscription or strategic partnership. In many cases, we can address customers’ needs with existing or variants of existing workflows. Alternately, we may form strategic partnerships to develop substantially new workflows with our customers to address their needs. For the years ended December 31, 2018 and 2019, revenue was $21.2 million and $39.1 million from direct purchase (or 68% and 69%, respectively), respectively, none and $89,000 from subscription (or 0% for both periods), respectively, and $6.9 million and $9.6 million from strategic partnerships (or 22% and 17%, respectively), respectively. For the three months ended March 31, 2019 and 2020, revenue was $9.0 million and $9.4 million from direct purchase (or 71% and 69%, respectively), respectively, none and $55,000 from subscription (or 0% for both periods), respectively, and $2.3 million and $1.9 million from strategic partnerships (or 18% and 13%, respectively), respectively.

 

6


Table of Contents

LOGO

Our growth strategy

Our goal is to establish the Berkeley Lights Platform as the standard throughout the cell-based product value chain and drive substantial conversion of current cell biology workflows on to our platform. Our growth strategy is comprised of the following elements:

 

 

Drive new customer adoption of the Berkeley Lights Platform;

 

Expand the utilization of workflows across our customers’ value chains;

 

Increase the value of our workflows to our customers;

 

Drive utilization of our workflows and adoption of our platform across multiple customer sites;

 

Develop and monetize proprietary biological assets from our BioFoundry; and

 

Expand adoption of the Berkeley Lights Platform into new markets.

Risks associated with our business

Our business is subject to a number of risks and uncertainties, including those highlighted under “Risk factors” immediately following this prospectus summary. These risks include, among others, the following:

 

 

We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.

 

 

Our success depends on the success of our Berkeley Lights Platform and market acceptance of Digital Cell Biology. Our Berkeley Lights Platform and Digital Cell Biology may not achieve or maintain significant commercial market acceptance.

 

 

It may be difficult for us to implement our strategies for improving growth.

 

7


Table of Contents
 

Our limited operating history and rapid revenue growth make it difficult to evaluate our future prospects and the risks and challenges we may encounter.

 

 

Historically, our revenue has been primarily generated from direct platform sales, largely driven by Beacon, which requires a substantial sales cycle and is prone to quarterly fluctuations in revenue.

 

 

We may not successfully implement our strategy to provide customers access to our platform and Digital Cell Biology through alternative non-direct capital sales channels, including our subscription, partnering and services offerings.

 

 

The Berkeley Lights Platform is comprised of OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software, which may contain undetected errors or defects and may not meet the expectations of our customers, which means our business, financial condition, results of operations and prospects could suffer.

 

 

Public health crises such as pandemics or similar outbreaks could cause a disruption of the development of our platform technologies and products, and adversely impact our business.

 

 

If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including the Berkeley Lights Platform, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.

 

 

Claims by AbCellera Biologics Inc., or AbCellera, that we infringe their intellectual property rights may adversely affect our business, financial condition, results of operations and prospects.

Implications of being an emerging growth company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies that are not emerging growth companies. These exemptions include, but are not limited to:

 

 

reduced obligations with respect to financial data, including presenting only two years of audited financial statements and only two years of related management’s discussion and analysis of financial condition and results of operations in this prospectus;

 

 

reduced disclosure obligations regarding executive compensation in this prospectus and in our periodic reports and proxy statements;

 

 

an exemption from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; and

 

 

exemptions from the requirements of holding a non-binding advisory vote on executive compensation and the requirement to obtain stockholder approval of any golden parachute payments not previously approved.

Accordingly, the information contained herein may be different than the information you receive from other public companies in which you hold stock.

 

8


Table of Contents

We will remain an emerging growth company until the earliest of (1) the last day of the fiscal year following the fifth anniversary of the consummation of this offering, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, or the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of the second fiscal quarter of such year or (4) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

In addition, Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and we have adopted and will continue to adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies that are not emerging growth companies.

Corporate information

We were incorporated in Delaware in 2011 as Berkeley Lights, Inc. Our offices are located at 5858 Horton Street, Suite 320, Emeryville, California 94608. Our telephone number is (510) 858-2855. Our corporate website is www.berkeleylights.com. The information contained on or that can be accessed through our website is not incorporated by reference into this prospectus.

This prospectus includes our trademarks and trade names, including, without limitation, Berkeley Lights, Inc., Beacon®, OptoSelect, NanoPen, Lightning, Culture Station and our Berkeley Lights logo, which are our property and are protected under applicable U.S. and foreign intellectual property laws. This prospectus also includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to elsewhere in this prospectus appear without any “” or “®” symbol, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of any applicable licensor, to these trademarks and tradenames.

 

9


Table of Contents

The offering

 

Common stock offered by us

7,400,000 shares

 

Underwriters option to purchase additional shares

We have granted the underwriters an option to purchase up to 1,110,000 additional shares of common stock from us. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.

 

Common stock to be outstanding immediately after this offering

60,943,919 shares (or 62,053,919 shares if the underwriters exercise in full their option to purchase additional shares)

 

Use of proceeds

We estimate that the net proceeds from this offering will be approximately $114.0 million, or $131.5 million if the underwriters exercise in full their option to purchase additional shares, assuming an initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

  We currently expect to use our net proceeds from this offering, together with our existing cash and cash equivalents, for general corporate purposes, including working capital, and funding our research and development and sales and marketing activities. We may also use a portion of the remaining net proceeds, if any, to acquire complementary businesses, products, services or technologies, including scientific expertise. However, we do not have agreements or commitments for any acquisitions at this time. See “Use of proceeds” on page 65 for a more complete description of the intended use of proceeds from this offering.

 

Risk factors

See “Risk factors” beginning on page 17 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our common stock.

 

Proposed Nasdaq Global Market trading symbol

“BLI”

The number of shares of common stock to be outstanding after this offering is based on 53,543,919 shares of common stock outstanding as of March 31, 2020, which includes 50,462,272 shares of our common stock issuable upon the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2020 and excludes:

 

 

10,456,747 shares of common stock issuable upon the exercise of stock options outstanding as of March 31, 2020, with a weighted-average exercise price of $5.20 per share;

 

 

28,000 shares of common stock issuable upon the exercise of stock options granted after March 31, 2020, with a weighted-average exercise price of $10.80 per share;

 

10


Table of Contents
 

904,693 shares of common stock that were reserved for future issuance as of March 31, 2020 under our 2011 Equity Incentive Plan, as amended, or the 2011 Plan (without giving effect to the issuance of stock options to purchase 28,000 shares of common stock subsequent to March 31, 2020 described above), which will become available for issuance under our 2020 Incentive Award Plan, or the 2020 Plan, upon the effectiveness of the 2020 Plan;

 

 

136,519 shares of common stock issuable upon the exercise of an outstanding warrant to purchase shares of our convertible preferred stock that will convert into a warrant exercisable for an equal number of shares of common stock immediately prior to the completion of this offering, as of March 31, 2020, with an exercise price of $5.86 per share;

 

 

6,750,000 shares of common stock reserved for future issuance under the 2020 Plan, which will become effective on the day prior to the first public trading date of our common stock, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, of which options to purchase 635,000 shares of common stock at an exercise price equal to the initial public offering price set forth on the cover of this prospectus will be granted to certain of our employees and a member of our board of directors coincident with this offering; and

 

 

612,150 shares of common stock reserved for future issuance under our 2020 Employee Stock Purchase Plan, or the ESPP, which will become effective on the day prior to the first public trading date of our common stock, as well as any automatic increases in the number of shares of certain of our common stock reserved for future issuance under this plan.

Unless otherwise indicated, all information in this prospectus assumes or gives effect to:

 

 

a 1-for-2 reverse stock split of our common stock and convertible preferred stock to be effected prior to the effectiveness of the registration statement of which this prospectus is a part;

 

 

the conversion of all shares of our convertible preferred stock outstanding as of March 31, 2020, into an aggregate of 50,462,272 shares of our common stock immediately prior to the completion of this offering;

 

 

the conversion of our outstanding warrant to purchase 136,519 shares of our convertible preferred stock into a warrant to purchase 136,519 shares of our common stock immediately prior to the completion of this offering;

 

 

the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, which will occur immediately prior to the completion of this offering;

 

 

no exercise of the outstanding options or warrants subsequent to March 31, 2020; and

 

 

no exercise of the underwriters’ option to purchase additional shares.

 

11


Table of Contents

Summary consolidated financial data

The following tables set forth a summary of our consolidated financial and other data for the periods and as of the dates indicated. The summary consolidated statements of operations data for the years ended December 31, 2018 and 2019 are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The summary consolidated statements of operations data for the three months ended March 31, 2019 and 2020, and the summary consolidated balance sheet data as of March 31, 2020, are derived from our unaudited consolidated interim financial statements and related notes included elsewhere in this prospectus. Our unaudited consolidated interim financial statements were prepared in accordance with generally accepted accounting principles in the United States, or GAAP, on the same basis as our audited consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, that are necessary for the fair presentation of the financial information set forth in those financial statements. Our historical results are not necessarily indicative of our future results for any period and our results for the three months ended March 31, 2020 are not necessarily indicative of results expected for the year ending December 31, 2020. You should read this data together with our audited consolidated financial statements and related notes appearing elsewhere in this prospectus and the information under the captions “Selected consolidated financial data” and “Management’s discussion and analysis of financial condition and results of operations.” The summary financial data included in this section are not intended to replace the consolidated financial statements and related notes included elsewhere in this prospectus.

 

     
     Year ended December 31,     Three months ended March 31,  
(in thousands, except share and per share data)    2018     2019     2019     2020  
                 (unaudited)  

Consolidated statements of operations and comprehensive loss data:

        

Revenue:

        

Product revenue

   $ 22,882     $ 43,460     $ 9,527     $ 10,683  

Service revenue

     8,417       13,233       3,114       3,095  
  

 

 

 

Total revenue

     31,299       56,693       12,641       13,778  

Cost of sales:

        

Product cost of sales

     6,585       11,245       2,456       2,620  

Service cost of sales

     1,596       1,972       340       1,179  
  

 

 

 

Total cost of sales

     8,181       13,217       2,796       3,799  
  

 

 

 

Gross profit

     23,118       43,476       9,845       9,979  

Operating expenses:

        

Research and development(1)

     29,077       38,414       8,743       10,976  

General and administrative(1)

     9,069       12,362       2,642       3,997  

Sales and marketing(1)

     6,131       9,237       1,837       3,234  
  

 

 

 

Total operating expenses

     44,277       60,013       13,222       18,207  
  

 

 

 

Loss from operations

     (21,159     (16,537     (3,377     (8,228

Other income (expense):

        

Interest expense

     (2,204     (1,425     (354     (357

Interest income

     872       909       232       151  

Other income (expense), net

     (777     (1,180     (687     25  
  

 

 

 

Loss before income taxes

     (23,268     (18,233     (4,186     (8,409

Provision for income taxes

     69       69       19       16  
  

 

 

 

Net loss and net comprehensive loss

   $ (23,337   $ (18,302   $ (4,205     (8,425

 

  

 

 

 

 

12


Table of Contents
     
     Year ended December 31,     Three months ended March 31,  
(in thousands, except share and per share data)    2018     2019     2019     2020  
                 (unaudited)  

Net loss attributable to common stockholders per share, basic and diluted(2)

   $ (10.19   $ (7.46   $ (1.84   $ (3.02
  

 

 

 

Weighted-average shares used in calculating net loss per share, basic and diluted(2)

     2,605,124       2,883,950           2,717,542       3,047,967  
  

 

 

 

Pro forma net loss attributable to common stockholders per share, basic and diluted (unaudited) (2)

     $ (0.34     $ (0.16
    

 

 

     

 

 

 

Weighted-average shares used in computing pro forma net loss per share, basic and diluted (unaudited)(2)

       53,346,222         53,510,239  
    

 

 

     

 

 

 

Other financial and operating data (unaudited):

        

Adjusted EBITDA(3)

   $ (14,976   $ (7,935   $ (1,405   $ (5,730

 

 

 

(1)   Includes stock-based compensation as follows:

 

     
     Year ended
December 31,
     Three months ended
March 31,
 
(in thousands)    2018      2019                2019     

2020

 
                   (unaudited)  

Cost of sales

   $      $      $      $ 6  

Research and development

     1,040        1,672        398        511  

General and administrative

     678        1,763        324        529  

Sales and marketing

     268        325        92        133  
  

 

 

 

Total stock-based compensation expense

   $ 1,986      $ 3,760      $ 814      $ 1,179  

 

 

 

(2)   See Note 2 and Note 15 to our consolidated financial statements included elsewhere in this prospectus for further details on the calculation of net loss per share attributable to common stockholders, basic and diluted, the weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted, and unaudited pro forma information.

 

(3)   Adjusted EBITDA is a non-United States generally accepted accounting principle, or GAAP, financial measure that we define as net loss adjusted for interest expense, interest income, other income (expense), net, provision for income taxes, depreciation and stock-based compensation expenses. See the section titled “Selected consolidated financial data” for a reconciliation between Adjusted EBITDA and net loss, the most directly comparable GAAP financial measure, and a discussion about the limitations of Adjusted EBITDA.

The table below presents our consolidated balance sheet data as of March 31, 2020 on:

 

 

an actual basis;

 

 

a pro forma basis, to reflect: (i) the conversion of all of the outstanding shares of our convertible preferred stock as of March 31, 2020 into an aggregate of 50,462,272 shares of common stock immediately prior to the completion of this offering; and (ii) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering; and

 

 

a pro forma as adjusted basis, giving effect to the pro forma adjustments discussed above, and giving further effect to the sale of 7,400,000 shares of our common stock in this offering at an assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

13


Table of Contents
   
     As of March 31, 2020  
(in thousands)    Actual    

Pro forma

    Pro forma as
adjusted(1)
 
     (unaudited)     (unaudited)     (unaudited)  

Consolidated balance sheet data:

      

Cash and cash equivalents

   $ 70,306     $ 70,306     $ 184,300  

Working capital(2)

     79,611       79,611       193,605  

Total assets

     122,778       122,778       236,564  

Total liabilities

     46,098       46,098       45,890  

Total convertible preferred stock

     224,769              

Accumulated deficit

     (158,725     (158,725     (158,725

Total stockholders’ equity

     76,680       76,680       190,674  

 

 

 

 

(1)   The pro forma as adjusted information discussed above is illustrative only and will depend on the actual initial public offering price and other terms of this offering determined at pricing. Each $1.00 increase or decrease in the assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders’ (deficit) equity by approximately $6.9 million, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase or decrease of 1.0 million shares of common stock offered by us would increase or decrease, as applicable, each of our pro forma as adjusted cash and cash equivalents, working capital, total assets and total stockholders’ (deficit) equity by approximately $15.8 million, assuming the assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

(2)   Working capital is calculated as current assets less current liabilities. See our consolidated financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

Recent operating results (preliminary and unaudited)

Our financial results as of and for the three months ended June 30, 2020 are not yet complete and will not be available until after the completion of this offering. Set forth below are certain preliminary estimated and unaudited data as of and for the three months ended June 30, 2020. The estimated unaudited data set forth below are preliminary and actual results remain subject to the completion of management’s and our audit committee’s reviews and our other financial closing processes as well as the completion and preparation of our consolidated financial data as of and for the three months ended June 30, 2020. Such estimated and unaudited data constitute forward-looking statements based solely on information available to us as of the date of this prospectus and may differ materially from actual results. For additional information, see “Special note regarding forward-looking statements” and “Risk factors.”

The preliminary estimates as of and for the three months ended June 30, 2020 set forth below have been prepared by, and are the responsibility of, management. KPMG LLP, our independent registered public accounting firm, has not audited, reviewed, compiled, or performed any procedures with respect to such preliminary data. Accordingly, KPMG LLP does not express an opinion or any other form of assurance with respect thereto.

Once our quarterly financial closing processes are completed, we may report financial results and other data that could differ, and the differences could be material. The following information and estimates contain certain forward-looking statements. While we believe that such information and estimates are based on reasonable assumptions, our actual results may vary, and such variations may be material. Factors that could cause the preliminary estimated and unaudited data to differ include, but are not limited to: (i) additional adjustments in the calculation of, or application of accounting principles for, the financial results and financial position as of

 

14


Table of Contents

and for the three months ended June 30, 2020; (ii) discovery of new information that affects accounting estimates, management judgment, or impacts of valuation methodologies underlying these estimated results; and (iii) the completion of the interim review of our results for the three and six months ended June 30, 2020.

Preliminary financial results as of and for the three months ended June 30, 2020

Our preliminary estimated and unaudited data as of and for the three months ended June 30, 2020 are as follows:

 

   
     Three Months Ended
June 30, 2020
 
     Estimated  
(in thousands)    Low     High  
             (unaudited)  

Consolidated statement of operations data:

    

Revenue

   $ 10,400     $ 10,500  

Gross profit

     6,550       6,800  

Loss from operations

     (13,000     (12,500

 

  

 

 

   

 

 

 

 

   
     As of
June 30, 2020
 
(in thousands)    Estimated  
     (unaudited)  

Consolidated balance sheet data:

  

Cash and cash equivalents

   $ 59,150  

Long-term debt, current and non-current

     19,850  

 

  

 

 

 

Below we have provided information regarding comparisons to the previous quarter for context.

Revenue

Our preliminary unaudited estimated revenue for the three months ended June 30, 2020 ranges between $10.4 million and $10.5 million, which represents decreases of 25% and 24%, respectively, from revenue of $13.8 million for the three months ended March 31, 2020. This expected decrease is primarily attributable to the timing of platform placements, which resulted in a reduction in platform placements from six platforms in the three months ended March 31, 2020 to four platforms in the three months ended June 30, 2020, of which, three of the platform placements were with new customers. We were affected by the COVID-19 pandemic, which impact began in the first quarter of 2020 and persisted through the second quarter of 2020. The impact negatively affected our ability to ship, install and train with some customers in certain geographies and locations, as well as resulted in delays to purchasing decisions and negotiations. We also experienced a reduction in revenue associated with milestones and programs during the three months ended June 30, 2020, primarily resulting from our election to buy-out one of the workflow programs that is being developed in collaboration with Ginkgo under the terms of the existing relationship, such buy-out terminating Ginkgo’s exclusive rights on the related workflow. The amount of the buy-out, which was recorded as a revenue reduction in the quarter, was $0.7 million, calculated as 50% of the of the amount billed to Ginkgo on the workflow through June 30, 2020.

Gross profit and gross margin

Our preliminary unaudited estimated gross profit and gross margin for the three months ended June 30, 2020 ranges between $6.6 million, or 63%, and $6.8 million, or 65%, which represent decreases of 34% and 32%,

 

15


Table of Contents

respectively, from gross profit of $10.0 million, or 72%, for the three months ended March 31, 2020. The expected decrease in gross profit and gross margin was the result of the overall decrease in revenue while our manufacturing costs remained relatively flat, as well as due to the mix of the components of revenue in the three months ended June 30, 2020 as compared to the three months ended March 31, 2020, which included a reduction of milestone and program revenue for the reasons discussed above.

Loss from operations

Our preliminary unaudited estimated loss from operations for the three months ended June 30, 2020 ranges between $12.5 million and $13.0 million, which represents increases of 52% and 59%, respectively, compared to loss from operations of $8.2 million for the three months ended March 31, 2020. The expected increase in loss from operations resulted primarily from the decrease in revenue and gross profit due to the reasons described above as well as increases in spend associated with our ongoing research and development activities related to testing and qualification materials and other costs related to various projects to develop and improve systems, workflows and assays, offset by a reduction in spend on travel as a result of travel restrictions both abroad and in the United States, as well as reductions in marketing expenses associated with, amongst other things, reduced commissions resulting from lower sales, and lower marketing and advertising expenses as a result of the cancellation and delay of several tradeshows and events due to the impact of COVID-19. Spend on general and administrative expenses is expected to be relatively flat for the three months ended June 30, 2020 as compared to the three months ended March 31, 2020.

 

16


Table of Contents

Risk factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our consolidated financial statements and the related notes and “Management’s discussion and analysis of financial condition and results of operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations and prospects. In such an event, the market price of our common stock could decline, and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks related to our business and strategy

We have incurred significant losses since inception, we expect to incur losses in the future and we may not be able to generate sufficient revenue to achieve and maintain profitability.

We have incurred significant losses since our inception. For the years ended December 31, 2018 and 2019, we incurred net losses of $23.3 million and $18.3 million, respectively, and for the three months ended March 31, 2019 and 2020, we incurred net losses of $4.2 million and $8.4 million, respectively. As of March 31, 2020, we had an accumulated deficit of $158.7 million. We expect that our operating expenses will continue to increase as we grow our business and will also increase as a result of our becoming a public company. Since our inception, we have financed our operations primarily from private placements of our convertible preferred stock, the incurrence of indebtedness, and to a lesser extent, revenue derived from our Berkeley Lights Platform. We have devoted substantially all of our resources to the development and commercialization of our Berkeley Lights Platform and to research and development activities related to advancing and expanding our scientific and technological capabilities. We will need to generate significant additional revenue to achieve and sustain profitability, and even if we achieve profitability, we cannot be sure that we will remain profitable for any substantial period of time. We may never be able to generate sufficient revenue to achieve or sustain profitability and our recent and historical growth should not be considered indicative of our future performance.

Our success depends on the success of our Berkeley Lights Platform and market acceptance of Digital Cell Biology. Our Berkeley Lights Platform and Digital Cell Biology may not achieve or maintain significant commercial market acceptance.

Our commercial success is dependent upon our ability to continue to successfully market and sell our Berkeley Lights Platform and provide customers access to Digital Cell Biology. Our ability to achieve and maintain commercial market acceptance of our Berkeley Lights Platform and provide customers access to Digital Cell Biology will depend on a number of factors, including:

 

 

our ability to increase awareness of the capabilities of our technology and solutions;

 

 

our customers’ willingness to adopt new technologies and workflows;

 

 

whether our platform reliably provides advantages over legacy and other alternative technologies and is perceived by customers to be cost effective;

 

 

our ability to execute on our strategy to provide multiple channels to access our Berkeley Lights Platform and Digital Cell Biology;

 

 

the rate of adoption of our platform and solutions by biopharmaceutical companies, academic institutions and others;

 

17


Table of Contents
 

prices we charge for a direct purchase of, or other access to, our platform;

 

 

the relative reliability and robustness of our platform as a whole and the components of our platform, including, for example, Beacon, Lightning and Culture Station;

 

 

our ability to develop new workflows and solutions for customers;

 

 

if competitors develop and commercialize a platform that performs functional testing of cells at scale;

 

 

the timing and scope of any approval that may be required by the U.S. Food and Drug Administration, or FDA, for our next generation products and/or solutions;

 

 

the impact of our investments in product innovation and commercial growth;

 

 

negative publicity regarding our or our competitors’ products resulting from defects or errors; and

 

 

our ability to further validate our technology through research and accompanying publications.

We cannot assure you that we will be successful in addressing each of these criteria or other criteria that might affect the market acceptance of our products. If we are unsuccessful in achieving and maintaining market acceptance of our products, our business, financial condition, results of operations and prospects could be adversely affected.

Historically, our revenue has been primarily generated from direct platform sales, largely driven by Beacon, which requires a substantial sales cycle and is prone to quarterly fluctuations in revenue.

We made our first commercial sale of Beacon in the United States in December 2016. Direct platform sales of Beacon and Lightning together accounted for 68% and 69% of our revenue for the years ended December 31, 2018 and 2019, respectively, and 71% and 69% of our revenue for the three months ended March 31, 2019 and 2020, respectively. We expect that, for at least the foreseeable future, direct capital sales of our Berkeley Lights Platform will continue to account for a substantial portion of our revenue while we develop alternative access channels to our platform and Digital Cell Biology. The sales cycle for capital equipment is slow and can take multiple quarters to complete. In addition, many purchases of our platform involve significant customization of the terms of the transaction requiring additional time and effort to negotiate and complete the sale, and several components of our systems require an order lead time of six months to ten months. Furthermore, in certain situations we have entered into feasibility study arrangements in advance of a direct sale in order to provide a customer with additional information to make the purchase decision and in such arrangements workflows may be customized for or by customers, a process which can be time consuming. As a result of this lengthy and unpredictable sales cycle, until such time as we establish a significant recurring revenue channel, we will be prone to quarterly fluctuations in our revenue as capital sales of our Berkeley Lights Platform will continue to comprise a significant component of our revenue. We may not be successful in increasing the proportion of revenue we derive from non-direct capital sales channels, in which case we will continue to depend on direct sales of our Berkeley Lights Platform for a significant portion of our revenue and our revenue will continue to fluctuate accordingly.

It may be difficult for us to implement our strategies for improving growth.

Our success will depend on our ability to grow market penetration in existing markets and our ability to identify new applications for our technologies to capture a greater share of the cell-based product value chain. Our ability to grow our market penetration in existing markets will depend on our ability to attract new customers by increasing awareness of the capabilities of our technology and solutions. Future revenue growth will also depend on our ability to develop and market new workflows, technologies and solutions to meet our existing customers’ evolving needs, as well as our ability to identify new applications and customers for our technology

 

18


Table of Contents

in additional markets beyond the antibody therapeutics, cell therapy and synthetic biology markets. As we continue to scale our business, we may find that certain of our products, certain customers or certain markets, including the biopharmaceutical market, may require a dedicated sales force or sales personnel with different experience than those we currently employ. Identifying, recruiting and training additional qualified personnel would require significant time, expense and attention. If we are unable to drive new customer conversion to Digital Cell Biology, expand adoption of Digital Cell Biology into new industries and markets, expand the application of workflows across our customers’ value chains, increase the usage and value of our workflows to our customers or develop and monetize proprietary biological assets, then our business, financial condition, results of operations and prospects could be adversely affected.

We may not successfully implement our strategy to provide customers access to our platform and Digital Cell Biology through alternative non-direct capital sales channels, including our subscription, partnering and services offerings.

Our ability to execute our growth strategy depends upon our ability to increase the adoption of the Berkeley Lights Platform. Historically, access to our platform was only available through direct capital sales of our systems. We have only recently implemented a strategy providing customers access to our platform through alternative channels, including through subscriptions, strategic partnerships or contracts for our services. Our ability to execute on these alternative access channels is unproven. We cannot assure you that we will be successful in developing these alternative access channels nor that any of them will gain market acceptance. Our failure to execute on this strategy will cause us to remain dependent on lengthy capital equipment sales and our revenue will continue to fluctuate accordingly.

Our revenue under our customer sales engagements, program agreements and strategic partnerships for any particular period can be difficult to forecast.

Because of the complexities and long sales cycles inherent in our business, including, in particular, certain customer feasibility study agreements and collaboration and development agreements, it is difficult to predict the timing of a customer’s purchase of our system and of the performance and completion of milestones under our customer and collaboration agreements. As a result, our revenue for any particular period can be difficult to forecast, especially in light of the challenging and inconsistent global macroeconomic environment and related market uncertainty. Our revenue may grow at a slower rate than in past periods or even decline on a year-over-year basis. For example, under our collaboration agreement with Ginkgo Bioworks, or Ginkgo, we are eligible to receive certain minimum annual payments from Ginkgo for purchases and services, as well as milestone payments upon the achievement of certain development and regulatory milestones resulting from the use of certain of our proprietary workflows. However, we are unable to predict with precision whether and the extent to which Ginkgo will exceed the minimum annual payments under our agreement, or the timing of the achievement of any milestones under the agreement, if achieved at all. In some cases, the timing and likelihood of payments to us under these agreements is dependent on our customers’ successful utilization of our products and workflows, which is outside of our control. Because of these factors, our operating results could vary materially from quarter to quarter from our forecasts.

If we cannot maintain our current relationships with customers, fail to sustain recurring sources of revenue with our existing customers, or if we fail to enter into new relationships, our future operating results would be adversely affected as a general matter.

In the years ended December 31, 2018 and 2019, revenue from our top five customers accounted for 40% and 35% of our total revenue, respectively, of which 8% and 10%, respectively, was from recurring revenue. In the three months ended March 31, 2019 and 2020, revenue from our top five customers accounted for 87% and 69% of our total revenue, respectively, of which 5% and 3%, respectively, was from recurring revenue. The

 

19


Table of Contents

revenue attributable to these customers may fluctuate in the future, which could have an adverse effect on our business financial condition, results of operations and prospects. For example, we rely on field of use or workflow license fees as a source of recurring revenue from our customers. These field of use license fees are paid annually by our customers in consideration of continued use of workflows in specified fields of use in accordance with the terms of the agreement with the customer. However, our ability to monitor the specific fields of use and enforce the payment of these corresponding fees is limited. Additionally, customers may use our platform or workflows in ways that violate the contractual field of use and we may not be able to access additional revenue for these expanded uses. In addition, the termination of these relationships could result in a temporary or permanent loss of revenue.

Our future success depends on our ability to maintain these relationships, to increase our penetration among these existing customers and to establish new relationships. We engage in conversations with other companies and institutions regarding potential commercial opportunities on an ongoing basis, which can be time consuming. There is no assurance that any of these conversations will result in a commercial agreement, or if an agreement is reached, that the resulting relationship will be successful. Additionally, our field of use licensing model may lengthen the negotiations of, or prevent the successful conclusion of, commercial agreements with our potential customers due to such potential customer’s concerns with paying such recurring revenue. Speculation in the industry about our existing or potential commercial relationships can be a catalyst for adverse speculation about us, our products and our technology, which can adversely affect our reputation and our business.

We cannot assure investors that we will be able to further penetrate our existing markets or that our products will gain adequate market acceptance. Any failure to increase penetration in our existing markets would adversely affect our ability to improve our operating results.

Our operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations.

Our quarterly and annual operating results have fluctuated significantly in the past and may fluctuate significantly in the future, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control, including, but not limited to:

 

 

the level of demand for our platform and solutions, which may vary significantly;

 

 

the length of time of the sales cycle for purchases of our systems, including lead time needed to develop custom workflows or to manufacture component parts;

 

 

our ability to successfully implement alternative non-capital purchase channels, including subscription, partnership and services offerings and the design of any such alternatives;

 

 

the timing and cost of, and level of investment in, research, development, regulatory approval and commercialization activities relating to our products, which may change from time to time;

 

 

the start and completion of projects in which our development services are utilized;

 

 

the relative reliability and robustness of our platform, including our systems;

 

 

the introduction of new products or product enhancements by us or others in our industry;

 

 

expenditures that we may incur to acquire, develop or commercialize additional products and technologies;

 

20


Table of Contents
 

expenditures involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including costs related to our intellectual property litigation with AbCellera Biologics Inc., or AbCellera, and the outcome of this and any other future patent litigation we may be involved in;

 

 

changes in governmental regulations or in the status of our regulatory approvals or applications;

 

 

future accounting pronouncements or changes in our accounting policies; and

 

 

general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

The effect of one of the factors discussed above, or the cumulative effects of a combination of factors discussed above, could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance.

Our limited operating history and rapid revenue growth make it difficult to evaluate our future prospects and the risks and challenges we may encounter.

We completed our first commercial platform sale in December 2016 and have experienced significant revenue growth in recent periods. Revenue increased 81% to $56.7 million for the year ended December 31, 2019 as compared to $31.3 million for the year ended December 31, 2018. In addition, we operate in highly competitive markets characterized by rapid technological advances and our business has, and we expect it to continue, to evolve over time to remain competitive. Our limited operating history, evolving business and rapid growth make it difficult to evaluate our future prospects and the risks and challenges we may encounter and may increase the risk that we will not continue to grow at or near historical rates.

If we fail to address the risks and difficulties that we face, including those described elsewhere in this “Risk factors” section, our business, financial condition, results of operations and prospects could be adversely affected. We have encountered in the past, and will encounter in the future, risks and uncertainties frequently experienced by growing companies with limited operating histories in rapidly changing industries. If our assumptions regarding these risks and uncertainties, which we use to plan and operate our business, are incorrect or change, or if we do not address these risks successfully, our results of operations could differ materially from our expectations and our business, financial condition, results of operations and prospects could be adversely affected.

New product and workflow development involves a lengthy and complex process and we may be unable to develop or commercialize products and workflows on a timely basis, or at all.

Products and workflows from our research and development programs will take time and considerable resources to develop, and may include improvements or changes to our systems, software and consumables, and we may not be able to complete development and commercialize them on a timely basis, or at all. There can be no assurance that our programs will produce commercial products and solutions and before we can commercialize any new products or workflows, we will need to expend significant funds in order to:

 

 

conduct substantial research and development, which may include validation studies and potentially clinical trials;

 

 

further develop and scale our laboratory, engineering and manufacturing processes to accommodate different products and workflows;

 

 

further develop and scale our infrastructure to be able to analyze increasingly large amounts of data; and

 

21


Table of Contents
 

utilize data and analytical insights generated from running workflows on our current systems in our research and development programs in order to advance these programs.

Our product and workflow development processes involve a high degree of risk, and these efforts may be delayed or fail for many reasons, including:

 

 

failure of the product or workflow to perform as expected; and

 

 

failure to reliably demonstrate the process advantages of our products or workflows.

In addition, if we are unable to generate additional data and insights from our research and development programs, then we may not be able to advance these programs as quickly, or at all, or without significant additional investment, all of which could have a material adverse effect on our product and workflow development efforts.

Even if we are successful in developing new products or workflows, it will require us to make significant additional investments in marketing and selling resources in order to commercialize any such products or workflows. As a result, we may be unsuccessful in commercializing new products or workflows that we develop, which could adversely affect our business, financial condition, results of operations and prospects.

The Berkeley Lights Platform is comprised of OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software, which may contain undetected errors or defects and may not meet the expectations of our customers, which means our business, financial condition, results of operations and prospects could suffer.

Our platform is comprised of OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software, and may contain undetected errors or defects when first introduced or as new products are released. Disruptions or other performance problems with our platform or with the components that comprise our platform, including our proprietary workflows or those designed by our customers, may adversely impact our customers’ research or business, harm our reputation and result in reduced revenue or increased costs associated with repairs or replacements. If that occurs, we may also incur significant costs, the attention of our key personnel could be diverted or other significant customer relations problems may arise. We may also be subject to warranty claims or breach of contract for damages related to errors or defects in our solutions. Additionally, we may be subject to legal claims arising from any defects or errors in our platform, and in the workflows, systems and consumables that comprise our platform.

Our success depends on, among other things, the market’s confidence that the Berkeley Lights Platform is capable of substantially shortening the amount of time necessary to perform certain research activities as compared to the use of legacy and other alternative technologies, and will enable more efficient or improved pharmaceutical and biotechnology product development. We believe that pharmaceutical and biotechnology companies are likely to be particularly sensitive to product defects and errors in the use of our platform, including if our platform fails to deliver meaningful acceleration of certain research timelines accompanied by results at least as good as the results generated using legacy or other alternative technologies. There can be no guarantee that our platform will meet the expectations of pharmaceutical and biotechnology companies.

The complexity of our products and workflows and the amount of lead time required to deliver products and workflows to our customers have caused in the past, and may cause in the future, delays in releasing new products and workflows. In addition, we have experienced in the past, and may experience in the future, challenges with respect to the reliability of our systems and workflow yields. If there are delays in delivering our products or workflows to our customers or if our products or workflows fail to substantially shorten the amount of time necessary to perform certain research activities as compared to the use of legacy and other alternative technologies, or fail to generate reliable results for our customers, it could reduce or delay our

 

22


Table of Contents

revenue, which could adversely affect our business, financial condition, results of operations and prospects.

These complexities also require that we train our customers to operate them, which is expensive and time-consuming, in some instances, taking up to two weeks to complete. Any misuse of our products or workflows, including as a result of inadequate training, could cause our products or workflows not to perform as expected or to fail to demonstrate the process advantages of our products and workflows. The training requirement may also deter some customers from utilizing our products or workflows. Any of these results could adversely affect our business, financial condition, results of operations and prospects.

Repair or replacement costs due to warranties we provide on our products and consumables could have a material adverse effect on our business, financial condition and results of operations.

We provide a one-year assurance-type warranty on our system and chip consumables. Existing and future warranties place us at the risk of incurring future repair and/or replacement costs. At the time revenue is recognized, we establish an accrual for estimated warranty expenses based on historical data and trends of product reliability and costs of repairing and replacing defective products. We exercise judgment in estimating the expected product warranty costs, using data such as the actual and projected product failure rates, estimated repair costs, freight, material, labor and overhead costs. While we believe that historical experience provides a reliable basis for estimating such warranty cost, unforeseen quality issues or component failure rates could result in future costs in excess of such estimates, or alternatively, improved quality and reliability in our products and consumables could result in actual expenses that are below those currently estimated. As of March 31, 2020, we had accrued expenses of $1.2 million relating to product warranty accruals. Substantial amounts of warranty claims could have a material adverse effect on our business, financial condition and results of operations.

We generally recognize revenue from extended warranty and service contracts over the contract term, and changes in sales of such contracts may not be immediately reflected in our operating results.

We offer our customers the option to purchase extended warranty and service programs for regular system maintenance and system optimization on a fixed fee basis. We generally recognize revenue from our extended warranty and service contracts ratably over the contract term, which is typically twelve months, which could in some cases be subject to an early termination right. Revenue from our extended warranty and service contracts accounted for 31% and 43% of our recurring revenue for the years ended December 31, 2018 and 2019, respectively, and 49% and 42% of our recurring revenue for the three months ended March 31, 2019 and 2020, respectively. A portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to extended warranty and service contracts entered into during previous quarters. Consequently, a decline in new or renewed extended warranty and service contracts by our customers in any one quarter may not be immediately reflected in our revenue for that quarter. Such a decline, however, will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services and potential changes in our rate of renewals may not be fully reflected in our operating results until future periods.

If we were to be sued for product liability, we could face substantial liabilities that exceed our resources.

The marketing, sale and use of our products could lead to the filing of product liability claims were someone to allege that our products identified inaccurate or incomplete information regarding the cells analyzed or otherwise failed to perform as designed. We may also be subject to liability for errors in, a misunderstanding of or inappropriate reliance upon, the information we provide in the ordinary course of our business activities. A product liability claim could result in substantial damages and be costly and time-consuming for us to defend.

 

23


Table of Contents

We maintain product liability insurance, but this insurance may not fully protect us from the financial impact of defending against product liability claims. Any product liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future. Additionally, any product liability lawsuit could damage our reputation, or cause current customers to terminate existing agreements and potential clinical partners to seek other partners, any of which could impact our business, financial condition, results of operations and prospects.

Our business, financial condition, results of operations and prospects may be harmed if our customers discontinue or spend less on research, development and production and other scientific endeavors.

Our customers include biopharmaceutical companies and research institutions. Many factors, including public policy spending priorities, available resources and product and economic cycles, have a significant effect on the capital spending policies of these entities. Fluctuations in the research and development budgets of our customers could have a significant effect on the demand for our products. Our customers determine their research and development budgets based on several factors, including the need to develop new products, continued availability of governmental and other funding, competition and the general availability of resources. If research and development budgets are reduced, the impact could adversely affect our business, financial condition, results of operations and prospects.

If we are unable to support demand for the Berkeley Lights Platform, and for our future product offerings, including ensuring that we have adequate capacity to meet increased demand, or if we are unable to successfully manage our anticipated growth, our business could suffer.

As the number of customers accessing the Berkeley Lights Platform grows and our volume of installed systems increases, we will need to continue to increase our capacity for customer service and support, for billing and general process improvements, and expand our internal quality assurance programs. We will also need to purchase additional equipment, some of which can take several months or more to procure, setup and validate, and increase our personnel levels to meet increased demand. There is no assurance that any of these increases in scale, expansion of personnel, equipment, software and computing capacities or process enhancements will be successfully implemented, or that we will have adequate space, including in our laboratory facility, to accommodate such required expansion.

As we commercialize additional products, we will need to incorporate new equipment, implement new technology systems and laboratory processes, and hire new personnel, possibly with supplemental or different qualifications as compared to our current personnel. Failure to manage this growth or transition could result in turnaround time delays, higher product costs, declining product quality, deteriorating customer service and slower responses to competitive challenges. A failure in any one of these areas could make it difficult for us to meet market expectations for our products and could damage our reputation and the prospects for our business.

We will need to raise additional capital to fund our existing operations, improve our platform or develop and commercialize new products, workflows, consumables and reagent kits, or expand our operations.

Based on our current business plan, we believe the net proceeds from this offering, together with our current cash and cash equivalents and anticipated cash flow from operations, will be sufficient to meet our anticipated cash requirements for at least the 12 months from the date of this prospectus. If our available cash resources, net proceeds from this offering and anticipated cash flow from operations are insufficient to satisfy our liquidity requirements including because of lower demand for our products or the realization of other risks described in this prospectus, we may be required to raise additional capital prior to such time through issuances of equity or convertible debt securities, entrance into a credit facility or another form of third party funding or seek other debt financing.

 

24


Table of Contents

In any event, we may consider raising additional capital in the future to expand our business, to pursue strategic investments, to take advantage of financing opportunities or for other reasons, including to:

 

 

increase our sales and marketing efforts to drive market adoption of our Berkeley Lights Platform and address competitive developments;

 

 

fund development and marketing efforts of products from our programs or any other future products;

 

 

expand our technologies into additional markets;

 

 

acquire, license or invest in technologies;

 

 

acquire or invest in complementary businesses or assets; and

 

 

finance capital expenditures and general and administrative expenses.

Our present and future funding requirements will depend on many factors, including:

 

 

our ability to achieve revenue growth;

 

 

the cost of expanding our operations, including our biology and engineering laboratories and clean-room, and our offerings, including our sales and marketing efforts;

 

 

our rate of progress in launching and commercializing new products, and the cost of the sales and marketing activities associated with, establishing adoption of our Berkeley Lights Platform;

 

 

our rate of progress in, and cost of research and development activities associated with, products in research and development;

 

 

the effect of competing technological and market developments;

 

 

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including costs related to our intellectual property litigation with AbCellera, and the outcome of this and any other future patent litigation we may be involved in;

 

 

costs related to domestic and international expansion; and

 

 

the potential cost of and delays in product development as a result of any regulatory oversight applicable to our products.

The various ways we could raise additional capital carry potential risks. If we raise funds by issuing equity securities, dilution to our stockholders could result. Any preferred equity securities issued also could provide for rights, preferences or privileges senior to those of holders of our common stock. If we raise funds by issuing debt securities, those debt securities would have rights, preferences and privileges senior to those of holders of our common stock. The terms of debt securities issued or borrowings pursuant to a credit agreement could impose significant restrictions on our operations. If we raise funds through collaborations or licensing arrangements, we might be required to relinquish significant rights to our platform technologies or products or grant licenses on terms that are not favorable to us.

If we are unable to obtain adequate financing or financing on terms satisfactory to us, if we require it, our ability to continue to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances could be significantly limited, and could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

25


Table of Contents

Our loan and security agreement contains covenants, which restrict our operating activities, and we may be required to repay the outstanding indebtedness in an event of default, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

On May 23, 2018, we entered into a loan and security agreement, which was subsequently amended, with East West Bank, or the Lender, pursuant to which the Lender agreed to provide us a $20.0 million term loan facility with a maturity date of May 23, 2022. The full amount of the loan was funded on May 23, 2018. Until we have repaid such indebtedness, the loan and security agreement subjects us to various customary covenants, including requirements as to financial reporting, liquidity ratios and insurance and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or make other distributions on capital stock other than dividends payable solely in capital stock, to redeem capital stock, to enter into in-bound licensing agreements, to engage in transactions with affiliates, and to encumber our intellectual property. Our business may be adversely affected by these restrictions on our ability to operate our business.

We are permitted to make interest only payments on the loan facility through May 2021, at which time amortization begins. However, we may be required to repay the outstanding indebtedness under the loan facility if an event of default occurs under the loan and security agreement. An event of default will occur if, among other things, we fail to make required payments under the loan and security agreement; we breach any of our covenants under the loan and security agreement, subject to specified cure periods with respect to certain breaches; the Lender determines that a material adverse change (as defined in the loan and security agreement) has occurred; we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings; we are unable to pay our debts as they become due; or we default on contracts with third parties which would permit the third party to accelerate the maturity of such indebtedness or that could have a material adverse change on us. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs. In such a case, we may be required to delay, limit, reduce or terminate our product development or operations or grant to others rights to develop and market products that we would otherwise prefer to develop and market ourselves. The Lender could also exercise its rights as secured lender to take possession of and to dispose of the collateral securing the term loan, which collateral includes substantially all of our property (excluding intellectual property, which is subject to a negative pledge). Our business, financial condition, results of operations and prospects could be materially adversely affected as a result of any of these events.

Our actual operating results may differ significantly from any operating guidance we may provide.

From time to time, we may release guidance in our quarterly or annual earnings conference calls, quarterly or annual earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which will include forward-looking statements, will be based on projections prepared by our management. These projections may not be prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, or AICPA, and neither our registered public accountants nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person will express any opinion or any other form of assurance with respect to the projections.

Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we may release guidance is to

 

26


Table of Contents

provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such third parties.

Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from our guidance and the variations may be material.

Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk factors” section in this prospectus could result in actual operating results being different from our guidance, and the differences may be adverse and material.

The sizes of the markets and forecasts of market growth for our Berkeley Lights Platform and other of our key performance indicators are based on a number of complex assumptions and estimates, and may be inaccurate.

We estimate annual total addressable markets and forecasts of market growth for our Berkeley Lights Platform and for our technologies under development. We have also developed a standard set of key performance indicators in order to enable us to assess the performance of our business in and across multiple markets, and to forecast future revenue. These estimates, forecasts and key performance indicators are based on a number of complex assumptions, internal and third party estimates and other business data, including assumptions and estimates relating to our ability to generate revenue from the development of new workflows. While we believe our assumptions and the data underlying our estimates and key performance indicators are reasonable, there are inherent challenges in measuring or forecasting such information. As a result, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates may change at any time, thereby reducing the predictive accuracy of these underlying factors and indicators. As a result, our estimates of the annual total addressable market and our forecasts of market growth and future revenue for our current or future products may prove to be incorrect, and our key performance indicators may not reflect our actual performance. If the annual total addressable market or the potential market growth for our platform is smaller than we have estimated or if the key performance indicators we utilize to forecast revenue are inaccurate, it may impair our sales growth and have an adverse impact on our business, financial condition, results of operations and prospects.

The life sciences technology market is highly competitive, and if we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue, or achieve and sustain profitability.

We face significant competition in the life sciences technology market. We currently compete with both established and early stage life sciences technology companies that design, manufacture and market systems, consumables, reagent kits and software for, among other applications, genomics, single-cell analysis, spatial analysis and immunology, and/or provide services related to the same. Growing understanding of the importance of single-cell information is leading to more companies offering services related to collecting such information. Potential competitors within our space include Danaher, Menarini Silicon Biosystems, Miltenyi Biotec and Sphere Fluidics Ltd., among others. In addition, our customers may also elect to develop their workflows on legacy systems rather than our platform and may decide to stop using our platform.

Our competitors and potential competitors may enjoy a number of competitive advantages over us, including:

 

 

longer operating histories;

 

 

larger customer bases;

 

 

greater brand recognition and market penetration;

 

 

greater financial resources;

 

27


Table of Contents
 

greater technological and research and development resources;

 

 

better system reliability and robustness;

 

 

greater selling and marketing capabilities; and

 

 

better established, larger scale and lower cost manufacturing capabilities.

As a result, our competitors and potential competitors may be able to respond more quickly to changes in customer requirements, devote greater resources to the development, promotion and sale of their platforms or instruments than we can or sell their platforms or instruments, or offer services competitive with our platform and services at prices designed to win significant levels of market share. We may not be able to compete effectively against these organizations.

In addition, competitors may be acquired by, receive investments from or enter into other commercial relationships with larger, well-established and well-financed companies. Certain of our competitors may be able to secure key inputs from vendors on more favorable terms, devote greater resources to marketing and promotional campaigns, adopt more aggressive pricing policies and devote substantially more resources to product development than we can. If we are unable to compete successfully against current and future competitors, we may be unable to increase market adoption and sales of our platform, which could prevent us from increasing our revenue or achieving profitability.

We must develop new products, adapt to rapid and significant technological change and respond to introductions of new products by competitors to remain competitive.

We sell our products in industries that are characterized by significant enhancements and evolving industry standards. As a result, our customers’ needs are rapidly evolving. If we do not appropriately innovate and invest in new technologies, our offerings may become less desirable in the markets we serve, and our customers could move to new technologies offered by our competitors or make products themselves. Though we believe customers in our markets display a significant amount of loyalty to their supplier of a particular product, we also believe that because of the initial time investment required by many of our customers to reach a purchasing decision for a new product, it may be difficult to regain that customer once the customer purchases a product from a competitor. Without the timely introduction of new products, services and enhancements, our offerings will likely become less competitive over time, in which case our competitive position and operating results could suffer. Accordingly, we focus significant efforts and resources on the development and identification of new technologies, products and markets to further broaden our offerings. To the extent we fail to timely introduce new and innovative products or services, adequately predict our customers’ needs or fail to obtain desired levels of market acceptance, our business may suffer and our operating results could be adversely affected.

If we do not successfully manage the development and launch of new products, our operating results could be adversely affected.

Further development and commercialization of our current and future products are key elements of our growth strategy. For example, we launched Lightning in June of 2019 and were required to make significant investments in resources to facilitate the successful commercialization of the system. In the first three months of 2020, we launched Culture Station and also launched two new workflows, Opto Plasma B Discovery 2.0 and Opto Cell Line Development 2.0, and we intend to launch additional new products and new versions of existing products in the next six to twelve months. The expenses or losses associated with unsuccessful product development or launch activities, our inability to improve the functionality or reliability and robustness of our current products, or lack of market acceptance of our new products could adversely affect our business,

 

28


Table of Contents

financial condition, results of operations and prospects. This future growth could create strain on our organizational, administrative and operational infrastructure, including laboratory operations, quality control, customer service and sales organization management.

We may be unable to manage our future growth effectively, which could make it difficult to execute our business strategy.

Since 2017, we have experienced rapid growth and anticipate further growth in our business operations. Our growth between 2017 and 2019 has required significant time and attention from our management, and placed strains on our operational and manufacturing systems and processes, financial systems and internal controls and other aspects of our business. We expect to continue to increase headcount and to hire more specialized personnel in the future as we grow our business. We will need to continue to hire, train and manage additional qualified scientists, engineers, laboratory personnel, client and account services personnel and sales and marketing staff and improve and maintain our technology to properly manage our growth. We may also need to hire, train and manage individuals with expertise that is separate, supplemental or different from expertise that we currently have, and accordingly we may not be successful in hiring, training and managing such individuals. If our new hires perform poorly, if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed.

Developing and launching new products and innovating and improving our existing products have required us to hire and retain additional scientific, engineering, sales and marketing, software, manufacturing, distribution and quality assurance personnel. As a result, we have experienced rapid headcount growth from 107 employees as of March 31, 2017 to 210 employees as of March 31, 2020. As we have grown, our employees have become more geographically dispersed. We currently serve customers located in approximately nine countries and plan to continue to expand to new international jurisdictions as part of our growth strategy, which will lead to increased dispersion of our employees, including sales employees and employees who are in our service and support groups. Moreover, we expect that we will need to hire additional accounting, finance and other personnel in connection with our becoming, and our efforts to comply with the requirements of being, a public company. Once public, our management and other personnel will need to devote a substantial amount of time towards maintaining compliance with these requirements. We may face challenges integrating, developing and motivating our rapidly growing and increasingly dispersed employee base.

We may not be able to maintain the quality, reliability or robustness of our platform, or the expected turnaround times of our services and support, or to satisfy customer demand as it grows. Our ability to manage our growth properly will require us to continue to improve our operational, financial and management controls, as well as our reporting systems and procedures. To effectively manage our growth, we must continue to improve our operational and manufacturing systems and processes, our financial systems and internal controls and other aspects of our business and continue to effectively expand, train and manage our personnel. The time and resources required to improve our existing systems and procedures, implement new systems and procedures and to adequately staff such existing and new systems and procedures is uncertain, and failure to complete this in a timely and efficient manner could adversely affect our operations and negatively impact our business and financial results.

We depend on our information technology systems, and any failure of these systems could harm our business.

We depend on information technology and telecommunications systems for significant elements of our operations, including our laboratory information management system, our computational biology system, our Cell Analysis Suite (CAS), our knowledge management system, our customer reporting, our workflows and our platform, comprising our OptoSelect chips and reagent kits, advanced automation systems, and advanced application and workflow software. We have installed, and expect to expand, a number of enterprise software

 

29


Table of Contents

systems that affect a broad range of business processes and functional areas, including for example, systems handling human resources, financial controls and reporting, contract management, regulatory compliance and other infrastructure operations. For example, in 2018, we implemented a new customer relationship management system and, in 2019, we implemented a new enterprise resource planning system. These implementations were expensive and required a significant effort in terms of both time and effort. In addition to the aforementioned business systems, we intend to extend the capabilities of both our preventative and detective security controls by augmenting the monitoring and alerting functions, the network design and the automatic countermeasure operations of our technical systems. These information technology and telecommunications systems support a variety of functions, including manufacturing operations, laboratory operations, data analysis, quality control, customer service and support, billing, research and development activities, scientific and general administrative activities.

Information technology and telecommunications systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious software, bugs or viruses, human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Any disruption or loss of information technology or telecommunications systems on which critical aspects of our operations depend could have an adverse effect on our business and our reputation, and we may be unable to regain or repair our reputation in the future.

We have limited experience in marketing and sales, and if we are unable to expand our marketing and sales organization to adequately address our customers’ needs, our business may be adversely affected.

We have limited experience in marketing and selling our products. We may not be able to market, sell or distribute our current products, or future products that we may develop, effectively enough to support our planned growth.

Competition for employees capable of selling expensive instruments within the pharmaceutical and biotechnology industries is intense. We may not be able to attract and retain personnel or be able to build an efficient and effective sales organization, which could negatively impact sales and market acceptance of our products and limit our revenue growth and potential profitability. In addition, the time and cost of establishing a specialized sales, marketing and service force for a particular product or service may be difficult to justify in light of the revenue generated or projected.

Our expected future growth will impose significant added responsibilities on members of management, including the need to identify, recruit, maintain and integrate additional employees. Our future financial performance and our ability to commercialize our products and to compete effectively will depend, in part, on our ability to manage this potential future growth effectively, without compromising quality.

We rely on distributors for the sale of our products in certain countries outside of the United States, in some cases, in addition to direct sales in such countries. We exert limited control over these distributors under our agreements with them, and if their sales and marketing efforts for our products in the region are not successful, our business would be materially and adversely affected. Locating, qualifying and engaging distribution partners with local industry experience and knowledge will be necessary in at least the short to mid-term to effectively market and sell our platform in certain countries outside the United States. We may not be successful in finding, attracting and retaining distribution partners, or we may not be able to enter into such arrangements on favorable terms. Even if we are successful in identifying distributors, such distributors may engage in sales practices that violate local laws or our internal policies. Furthermore, sales practices utilized by any such distribution parties that are locally acceptable may not comply with sales practices standards required under U.S. laws that apply to us, which could create additional compliance risk. If our sales and marketing

 

30


Table of Contents

efforts by us or our distributors are not successful outside the United States, we may not achieve significant market acceptance for our products outside the United States, which would materially and adversely impact our business, financial condition, results of operations and prospects.

The loss of any member of our senior management team or our inability to attract and retain highly skilled scientists, engineers and salespeople could adversely affect our business.

Our success depends on the skills, experience and performance of key members of our senior management team, including Eric D. Hobbs, Ph.D., our Chief Executive Officer, and Keith J. Breinlinger, Ph.D., our Chief Technology Officer. The individual and collective efforts of these employees will be important as we continue to develop our platform and additional products, and as we expand our commercial activities. The loss or incapacity of existing members of our executive management team could adversely affect our operations if we experience difficulties in hiring qualified successors. Our executive officers are at-will employees, and we cannot guarantee their retention for any period of time. We do not maintain “key person” insurance on any of our employees.

Our research and development programs and laboratory operations depend on our ability to attract and retain highly skilled scientists and engineers. We may not be able to attract or retain qualified scientists and engineers in the future due to the competition for qualified personnel among life science businesses. We also face competition from universities and public and private research institutions in recruiting and retaining highly qualified scientific and engineering personnel. We may have difficulties locating, recruiting or retaining qualified sales people. Recruiting and retention difficulties can limit our ability to support our research and development and sales programs. All of our employees are at-will, which means that either we or the employee may terminate their employment at any time.

We may acquire businesses or form joint ventures or make investments in other companies or technologies that could negatively affect our operating results, dilute our stockholders’ ownership, increase our debt or cause us to incur significant expense.

We may pursue acquisitions of businesses and assets. We also may pursue strategic alliances and joint ventures that leverage our technologies and industry experience to expand our offerings or distribution. We have no experience with acquiring other companies and limited experience with forming strategic partnerships. We may not be able to find suitable partners or acquisition candidates, and we may not be able to complete such transactions on favorable terms, if at all. The competition for partners or acquisition candidates may be intense, and the negotiation process will be time-consuming and complex. If we make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business, these acquisitions may not strengthen our competitive position, the transactions may be viewed negatively by customers or investors, we may be unable to retain key employees of any acquired business, relationships with key suppliers, manufacturers or customers of any acquired business may be impaired due to changes in management and ownership, and we could assume unknown or contingent liabilities. Any future acquisitions also could result in the incurrence of debt, contingent liabilities or future write-offs of intangible assets or goodwill, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects. We cannot guarantee that we will be able to fully recover the costs of any acquisition. Integration of an acquired company also may disrupt ongoing operations and require management resources that we would otherwise focus on developing our existing business. We may not realize the anticipated benefits of any acquisition, technology license, strategic alliance or joint venture. We also may experience losses related to investments in other companies, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

 

31


Table of Contents

To finance any acquisitions or joint ventures, we may choose to issue shares of our common stock as consideration, which would dilute the ownership of our stockholders. Additional funds may not be available on terms that are favorable to us, or at all. If the price of our common stock is low or volatile, we may not be able to acquire companies or fund a joint venture project using our stock as consideration.

Our products could become subject to more onerous regulation by the FDA or other regulatory agencies in the future, which could increase our costs and delay or prevent commercialization of our products, thereby materially and adversely affecting our business, financial condition, results of operations and prospects.

We make our platform, including our OptoSelect chips and reagent kits, advanced automation systems, and advanced application and workflow software available to customers as research-use-only, or RUO, products. RUO products are regulated by the FDA as medical devices, and include in vitro diagnostic products in the laboratory research phase of development that are being shipped or delivered for an investigation that is not subject to the FDA’s investigational device exemption requirements. Although medical devices are subject to stringent FDA oversight, products that are intended for RUO and are labeled as RUO are exempt from compliance with most FDA requirements, including premarket clearance or approval, manufacturing requirements, and others. A product labeled RUO but which is actually intended for clinical diagnostic use may be viewed by the FDA as adulterated and misbranded under the Federal Food, Drug, and Cosmetic Act, or FDCA, and subject to FDA enforcement action. The FDA has indicated that when determining the intended use of a product labeled RUO, the FDA will consider the totality of the circumstances surrounding distribution and use of the product, including how the product is marketed and to whom. The FDA could disagree with our assessment that our products are properly marketed as RUOs, or could conclude that products labeled as RUO are actually intended for clinical diagnostic use, and could take enforcement action against us, including requiring us to stop distribution of our products until we are in compliance with applicable regulations, which would reduce our revenue, increase our costs and adversely affect our business, prospects, results of operations and financial condition. In the event that the FDA requires us to obtain marketing authorization of our RUO products in the future, there can be no assurance that the FDA will grant any clearance or approval requested by us in a timely manner, or at all.

We may also in the future decide to develop medical device products that we expect to be intended for clinical or diagnostic uses. In the United States, before we can market a new medical device, or a new use of, new claim for or significant modification to an existing product, we must first receive either clearance under Section 510(k) of the FDCA, or approval of a premarket approval application from the FDA, unless an exemption applies. The process of obtaining approval or clearance from the FDA for new products, or with respect to enhancements or modifications to existing products, could take a significant period of time, require the expenditure of substantial resources, involve rigorous pre-clinical and clinical testing, require changes to products or result in limitations on the indicated uses of products. There can be no assurance that we will receive the required approvals or clearances for any new products or for modifications to our existing products on a timely basis or that any approval or clearance will not be subsequently withdrawn or conditioned upon extensive post-market study requirements. Moreover, even if we receive FDA clearance or approval of new products or modifications to existing products, we will be required to comply with extensive regulations relating to the development, research, clearance, approval, distribution, marketing, advertising and promotion, manufacture, adverse event reporting, recordkeeping, import and export of such products, which may substantially increase our operating costs and have a material impact on our business, profits and results of operations. Failure to comply with applicable regulations could jeopardize our ability to sell our products and result in enforcement actions such as: warning letters, fines, injunctions, civil penalties, termination of distribution, recalls or seizures of products, delays in the introduction of products into the market, total or partial suspension of production, refusal to grant future clearances or approvals, withdrawals or suspensions of current approvals, resulting in prohibitions on sales of our products, and in the most serious cases, criminal

 

32


Table of Contents

penalties. Occurrence of any of the foregoing could harm our reputation, business, financial condition, results of operations and prospects.

Due to the significant resources required to enable access in new markets, we must make strategic and operational decisions to prioritize certain markets, technology offerings or partnerships. We may expend our resources to access markets, develop technologies or form certain partnerships that do not yield meaningful revenue or we may fail to capitalize on markets, technologies or partnerships that may be more profitable or with a greater potential for success.

We believe our platform has potential applications across a wide range of markets and we have targeted certain markets in which we believe our technology has significant advantages, or for which we believe we have a higher probability of success or revenue opportunity or for which the path to commercialize products and realizing or achieving revenue is shorter. For example, in 2018 we entered into engagements regarding cell therapies with certain cancer centers and with an academic institution, and in 2019 we entered into engagements with several synthetic biology companies, including Amyris and Ginkgo. We seek to maintain a process of prioritization and resource allocation among our programs to maintain a balance between advancing near-term opportunities and exploring additional markets for our technology. However, due to the significant resources required for the development of workflows for new markets, we must make decisions on which markets to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, development, collaboration, management and financial resources toward particular markets or workflows may not lead to the development of any viable product and may divert resources away from better opportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties in respect of certain markets may subsequently also prove to be suboptimal and could cause us to miss valuable opportunities. In particular, if we are unable to develop additional relevant workflows for markets such as antibody therapeutics, cell therapy or the synthetic biology market it could slow or stop our business growth and negatively impact our business, financial condition, results of operations and prospects.

Our billing and collections processing activities are complex and time-consuming, and any delay in transmitting invoices or failure to comply with applicable billing requirements, could have an adverse effect on our future revenue.

Billing for our products, workflows and field of use licenses, consumables, reagent kits and services can be complex, time-consuming and expensive as many of our customers are large pharmaceutical or biotechnology companies and engage various different models for their accounts payable matters, including outsourcing to third parties. We may face increased risk in our collection efforts, including long collection cycles and the risk that we may never collect at all, either of which could adversely affect our business, financial condition, results of operations and prospects. Several factors make the billing process complex, including differences in information and billing requirements among our customers and the resources required to manage the billing process. These billing complexities and the related uncertainty in obtaining payment could negatively affect our revenue and cash flow, our ability to achieve profitability and the consistency and comparability of our results of operations.

If our sole operating facility becomes damaged or inoperable or we are required to vacate our existing facility, our ability to conduct and pursue our research and development efforts may be jeopardized.

We currently derive the majority of our revenue based upon scientific and engineering research and development, testing and manufacturing conducted at a single facility located in Emeryville, California. Our facility and equipment could be harmed or rendered inoperable or inaccessible by natural or man-made disasters or other circumstances beyond our control, including fire, earthquake, power loss, communications failure, war or terrorism, or another catastrophic event, such as a pandemic or similar outbreak or public health

 

33


Table of Contents

crisis, which may render it difficult or impossible for us to support our customers and develop updates, upgrades and other improvements to our OptoSelect chips and reagent kits, advanced automation systems, and advanced application and workflow software for some period of time. The inability to address system issues or manufacture consumables and reagent kits could develop if our facility is inoperable or suffers a loss of utilization for even a short period of time, may result in the loss of customers or harm to our reputation, and we may be unable to regain those customers or repair our reputation in the future. Furthermore, our facility and the equipment we use to perform our research and development work could be unavailable or costly and time-consuming to repair or replace. It would be difficult, time-consuming and expensive to rebuild our facility, to locate and qualify a new facility or license or transfer our proprietary technology to a third party. Even in the event we are able to find a third party to assist in research and development efforts, we may be unable to negotiate commercially reasonable terms to engage with the third party.

We carry insurance for damage to our property and the disruption of our business, but this insurance may not cover all of the risks associated with damage or disruption to our business, may not provide coverage in amounts sufficient to cover our potential losses and may not continue to be available to us on acceptable terms, if at all.

Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter and our policies have limits and significant deductibles. Some of the policies we currently maintain include general liability, property, umbrella and directors’ and officers’ insurance.

Any additional product liability insurance coverage we acquire in the future, may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and in the future we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses. A successful product liability claim or series of claims in which judgments exceed our insurance coverage could adversely affect our business, financial condition, results of operations and prospects, including preventing or limiting the commercialization of any products we develop.

We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified people to serve on our board of directors, our board committees or as executive officers. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant uninsured liability may require us to pay substantial amounts, which would adversely affect our business, financial condition, results of operations and prospects.

Public health crises such as pandemics or similar outbreaks could cause a disruption of the development of our platform technologies and products, and adversely impact our business.

In late 2019, a novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, surfaced in Wuhan, China. Since then, COVID-19 has spread to multiple other regions and countries, including the San Francisco Bay Area, where our primary office and laboratory space is located. The COVID-19 pandemic is evolving, and to date has led to the implementation of various responses, including government imposed shelter-in-place orders, quarantines, travel restrictions and other public health safety measures, as well as reported adverse impacts on healthcare resources, facilities and providers, in California, across the United States and in other countries. In response to the spread of COVID-19, and in accordance with direction from state and local government authorities, we have restricted access to our facilities mostly to personnel and third parties who must perform critical activities that must be completed on-site, limited the number of such

 

34


Table of Contents

personnel that can be present at our facilities at any one time, and requested that most of our personnel work remotely. In the event that government authorities were to further modify current restrictions, our employees conducting research and development or manufacturing activities may not be able to access our laboratory or manufacturing space, and our core activities may be significantly limited or curtailed, possibly for an extended period of time.

As a result of the COVID-19 outbreak, or similar pandemics and outbreaks, we have and may in the future experience severe disruptions, including:

 

 

interruption of or delays in receiving products and supplies from the third parties we rely on to, among other things, manufacture components to our systems or chips or to produce reagent kits for our workflows, due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems, which may impair our ability sell our products;

 

 

limitations on our business operations by local, state, or the federal government that could impact our ability to sell our products;

 

 

on-site visit limitations and prohibitions imposed by customers that could impact our ability to engage in pre-sales activities, such as in-person seminars and informational meetings on our Berkeley Lights Platform, and to provide post-sale activities, such as installation and verification, training and service and support;

 

 

delays in customers’ purchasing decisions and negotiations with customers and potential customers;

 

 

business disruptions caused by workplace, laboratory and office closures and an increased reliance on employees working from home, travel limitations, cyber security and data accessibility, or communication or mass transit disruptions; and

 

 

limitations on employee resources that would otherwise be focused on the conduct of our activities, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.

Any of these factors could severely impact our research and development activities, business operations and sales, or delay necessary interactions with local regulators, manufacturing sites and other important contractors and customers. These and other factors arising from the COVID-19 pandemic could worsen in countries that are already afflicted with COVID-19, could continue to spread to additional countries, or could return to countries where the pandemic has been partially contained, and could further adversely impact our ability to conduct our business generally and have a material adverse impact on our operations and financial condition and results.

The extent to which the outbreak may negatively impact our operations and results of operations or those of our third party manufacturers, suppliers, partners or customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and actions to contain the outbreak or treat its impact, such as social distancing, quarantines, lock-downs or business closures.

Security breaches, loss of data and other disruptions could compromise sensitive information related to our business or prevent us from accessing critical information and expose us to liability, which could adversely affect our business and our reputation.

In the ordinary course of our business, we collect and store sensitive data, including personally identifiable information, intellectual property and proprietary business information owned or controlled by ourselves or our employees, customers and other parties. We manage and maintain our applications and data utilizing a combination of on-site systems and cloud-based data centers. We utilize external security and infrastructure

 

35


Table of Contents

vendors to manage parts of our data centers. These applications and data encompass a wide variety of business-critical information, including research and development information, patient data, commercial information and business and financial information. We face a number of risks relative to protecting this critical information, including loss of access risk, inappropriate use or disclosure, unauthorized access, inappropriate modification and the risk of our being unable to adequately monitor and audit and modify our controls over our critical information. This risk extends to the third party vendors and subcontractors we use to manage this sensitive data or otherwise process it on our behalf. The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information. Although we take reasonable measures to protect sensitive data from unauthorized access, use or disclosure, no security measures can be perfect and our information technology and infrastructure may be vulnerable to attacks by hackers or viruses or breached due to employee error, malfeasance or other malicious or inadvertent disruptions. Any such breach or interruption could compromise our networks and the information stored there could be accessed by unauthorized parties, publicly disclosed, lost or stolen. Any such access, breach, or other loss of information could result in legal claims or proceedings, and liability under federal or state laws that protect the privacy of personal information, and regulatory penalties. Notice of breaches may be required to affected individuals, the Secretary of the Department of Health and Human Services or other state, federal or foreign regulators, and for extensive breaches, notice may need to be made to the media or State Attorneys General. Such a notice could harm our reputation and our ability to compete. Although we have implemented security measures and a formal, dedicated enterprise security program to prevent unauthorized access to patient data, such data is currently accessible through multiple channels, and there is no guarantee we can protect our data from breach. Unauthorized access, loss or dissemination could also disrupt our operations and damage our reputation, any of which could adversely affect our business.

We are currently subject to, and may in the future become subject to additional, U.S., state and foreign laws and regulations imposing obligations on how we collect, store and process personal information. Our actual or perceived failure to comply with such obligations could harm our business. Ensuring compliance with such laws could also impair our efforts to maintain and expand our customer base, and thereby decrease our revenue.

We are, and may increasingly become, subject to various laws and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future. These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results of operations and prospects.

In the United States, various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act, or CCPA, which increases privacy rights for California residents and imposes obligations on companies that process their personal information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data

 

36


Table of Contents

breach litigation. In addition, laws in all 50 U.S. states require businesses to provide notice to consumers whose personal information has been disclosed as a result of a data breach. State laws are changing rapidly and there is discussion in the U.S. Congress of a new comprehensive federal data privacy law to which we would become subject if it is enacted.

Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example, the E.U. General Data Protection Regulation, or GDPR, which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data. EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or 20 million, whichever is greater.

All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training employees and engaging consultants, which are likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects. Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

International expansion of our business exposes us to business, regulatory, political, operational, financial and economic risks associated with doing business outside of the United States.

We currently have limited international operations, but our business strategy incorporates potentially significant international expansion. We currently maintain relationships with distributors outside of the United States, and may in the future enter into new distributor relationships. We may also extend laboratory capabilities outside of the United States, both directly and possibly indirectly. Doing business internationally involves a number of risks, including:

 

 

multiple, conflicting and changing laws and regulations such as privacy regulations, tax laws, export and import restrictions, tariffs, economic sanctions and embargoes, employment laws, regulatory requirements and other governmental approvals, permits and licenses;

 

 

failure by us or our distributors to obtain approvals to conduct our business in various countries;

 

 

differing intellectual property rights;

 

 

complexities and difficulties in obtaining intellectual property protection, enforcing our intellectual property and defending against third party intellectual property claims;

 

37


Table of Contents
 

difficulties in staffing and managing foreign operations;

 

 

logistics and regulations associated with shipping systems and parts and components for systems, consumables and reagent kits, as well as transportation delays;

 

 

travel restrictions that limit the ability of marketing, presales, sales, services and support teams to service customers;

 

 

financial risks, such as longer payment cycles, difficulty collecting accounts receivable, the impact of local and regional financial crises on demand and payment for our products and exposure to foreign currency exchange rate fluctuations;

 

 

international trade disputes that could result in tariffs and other protective measures;

 

 

natural disasters, political and economic instability, including wars, terrorism and political unrest, outbreak of disease, boycotts, curtailment of trade and other business restrictions; and

 

 

regulatory and compliance risks that relate to maintaining accurate information and control over sales and distributors’ activities that may fall within the purview of the U.S. Foreign Corrupt Practices Act, or FCPA, its books and records provisions, or its anti-bribery provisions.

Any of these factors could significantly harm our future international expansion and operations and, consequently, our business, financial condition, results of operations and prospects. In addition, certain international markets are subject to significant political and economic uncertainty, including for example the effect of the withdrawal of the United Kingdom from the European Union. Significant political and economic developments in international markets for which we intend to operate, or the perception that any of them could occur, creates further challenges for operating in these markets in addition to creating instability in global economic conditions.

We could be adversely affected by violations of the FCPA and the anti-bribery and anti-corruption laws of the United States or other countries.

We are subject to the FCPA, which among other things prohibits companies and their intermediaries from making payments in violation of law to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage. We have engaged independent distributors in the past and currently use an independent distributor to sell our platform and solutions outside of the United States. Our reliance on independent distributors to sell the Berkeley Lights Platform internationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents and we could be held responsible for their actions. Other U.S. companies in the biotechnology and biopharmaceutical field have faced criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with these individuals. We are also subject to similar anti-bribery laws in the jurisdictions in which we operate, including the United Kingdom’s Bribery Act of 2010, which also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery, and the People’s Republic of China anti-bribery laws, including the PRC Anti-Unfair Competition Law amended in 2017, the PRC Criminal Law amended in 2017. These laws are complex and far-reaching in nature, and, as a result, we cannot assure you that we would not be required in the future to alter one or more of our practices to be in compliance with these laws or any changes in these laws or the interpretation thereof. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees and could result in a material adverse effect on our business, financial condition, results of operations and prospects. We could also suffer severe penalties, including criminal and civil penalties, disgorgement and other remedial measures.

 

38


Table of Contents

Our employees, consultants, distributors and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, consultants, distributors and commercial partners. Misconduct by these parties could include intentional failures to comply with the applicable laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. These laws and regulations may restrict or prohibit a wide range of pricing, discounting and other business arrangements. Such misconduct could result in legal or regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and any other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant civil, criminal and administrative penalties, which could have a significant impact on our business. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees and divert the attention of management in defending ourselves against any of these claims or investigations.

Risks related to manufacturing and supply

We and our third party manufacturing partners have limited experience in producing our systems and certain parts and components for our systems, and if we are unable to manufacture our systems in high-quality commercial quantities successfully and consistently to meet demand, our growth will be limited.

We have, to date, manufactured our systems in limited quantities. We currently manufacture our systems and related consumables and reagent kits through a combination of third party manufacturers and certain limited direct manufacturing at our facility in Emeryville, California. To manufacture our systems in the quantities that we believe will be required to meet anticipated market demand, we and our third party manufacturers will need to increase manufacturing capacity, which will involve significant challenges and may require additional quality controls and regulatory approvals. Neither we nor our third party manufacturers may successfully complete any required increase to existing manufacturing capacity in a timely manner, or at all.

If there is a disruption to our third party manufacturers’ operations, we will have no other means of producing our systems until the third party manufacturer restores the affected facilities or develop alternative manufacturing facilities. Additionally, any damage to or destruction of our or our third party manufacturers’ facilities or equipment may significantly impair our ability to manufacture systems on a timely basis.

If we or our third party manufacturers are unable to produce systems in sufficient quantities to meet anticipated customer demand, our business, financial condition, results of operations and prospects would be harmed. The lack of experience we and our manufacturing partners have in producing commercial quantities of our systems may also result in quality issues, and could result in system defects or errors or recalls. Manufacturing delays related to quality control could negatively impact our ability to bring our systems to market, harm our reputation and decrease our revenue. Any defects, errors or recalls could be expensive and generate negative publicity, which could impair our ability to market our systems and further affect our results of operations.

 

39


Table of Contents

We outsource the manufacturing of our systems, and components of our systems, to single source third party manufacturers. The failure of these manufacturers to manufacture systems or components on a timely basis could adversely affect our business.

We have engaged with two different third parties to manufacture our systems. One such third party manufacturer manufactures Beacon and Culture Station, and the other third party manufacturer manufactures Lightning. In addition, certain key parts of our systems are manufactured by various third parties. We do not have any control over the process or timing of the acquisition or manufacture of materials by our third party manufacturers, and cannot ensure that they will deliver to us the systems or components we order on time, or at all. If the operations of our third party manufacturers are interrupted, cease, or if they are unable to meet our delivery requirements due to capacity limitations or other constraints, we may be limited in our ability to fulfill new customer orders or to service or repair systems at current customer sites. Any change to another contract manufacturer, even if ultimately consummated, would likely entail significant delay, require us to devote substantial time and resources, result in additional costs, and could involve a period in which our systems could not be produced in a timely or consistently high-quality manner, any of which could harm our reputation and business, and frustrate our customers and cause them to turn to our competitors. Additionally, we may be unable to enter into agreements with another contract manufacturer on commercially reasonable terms or at all, which could have a material adverse impact on our business.

We use biological and hazardous materials that require considerable expertise and expense for handling, storage and disposal and may result in claims against us.

We work with materials, including chemicals, biological agents and compounds that could be hazardous to human health and safety or the environment. Our operations also produce hazardous and biological waste products. Federal, state and local laws and regulations govern the use, generation, manufacture, storage, handling and disposal of these materials and wastes. We are subject to periodic inspections by federal, state and local authorities to ensure compliance with applicable laws. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental laws and regulations may restrict our operations. If we do not comply with applicable regulations, we may be subject to fines and penalties.

In addition, we cannot eliminate the risk of accidental injury or contamination from these materials or wastes, which could cause an interruption of our commercialization efforts, research and development programs and business operations, as well as environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations. In the event of contamination or injury, we could be liable for damages or penalized with fines in an amount exceeding our resources and our operations could be suspended or otherwise adversely affected. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance.

Our manufacturing operations and those of our key third party manufacturers are dependent upon third party suppliers, including single source suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business.

Our systems contain several critical components, including multiple optical components (DMD, camera, objectives and filters), OEP drive electronics, fluidic system components (syringe pumps, valves and tubing), motion stages, motors and temperature control components. Some of the suppliers of critical components or materials are single or sole source suppliers and the replacement of these suppliers or the identification and qualification of suitable second sources may require significant time, effort and expense, and could result in delays in production, which could negatively impact our business operations and revenue. We do not have supply agreements with certain suppliers of these critical components and materials beyond purchase orders

 

40


Table of Contents

and, although we maintain a safety stock inventory either at one of our third party manufacturers or at our facility in Emeryville, CA, for certain critical components, forecasted amounts may be inaccurate and we may experience shortages as a result of serious supply problems with these manufacturers. There can be no assurance that our supply of components will not be limited, interrupted, or of satisfactory quality or continue to be available at acceptable prices. In addition, loss of any critical component provided by a single source supplier could require us to change the design of our manufacturing process based on the functions, limitations, features and specifications of the replacement components.

In addition, several other non-critical components and materials that comprise our systems are currently manufactured by a single supplier or a limited number of suppliers. In many of these cases, we have not yet qualified alternate suppliers and rely upon purchase orders, rather than long-term supply agreements. A supply interruption or an increase in demand beyond our current suppliers’ capabilities could harm our ability to manufacture our systems unless and until new sources of supply are identified and qualified. Our reliance on these suppliers subjects us to a number of risks that could harm our business, including:

 

 

interruption of supply resulting from modifications to or discontinuation of a supplier’s operations;

 

 

delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier’s variation in a component;

 

 

a lack of long-term supply arrangements for key components with our suppliers;

 

 

inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;

 

 

difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;

 

 

a modification or change in a manufacturing process or part that unknowingly or unintentionally negatively impacts the operation of our systems;

 

 

production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;

 

 

delay in delivery due to our suppliers prioritizing other customer orders over ours;

 

 

damage to our brand reputation caused by defective components produced by our suppliers;

 

 

increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and

 

 

fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.

Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers, which would have an adverse effect on our business.

We forecast sales to determine requirements for components and materials used in our systems, and if our forecasts are incorrect, we may experience delays in shipments or increased inventory costs.

We and our third party manufacturers keep limited materials, components and finished products on hand. To manage our operations with our third party manufacturers and suppliers, we forecast anticipated product orders and material requirements to predict our inventory needs and enter into purchase orders on the basis of these requirements. Several components of our systems require an order lead time of six months to ten

 

41


Table of Contents

months. Our limited historical commercial experience and rapid growth may not provide us with enough data to consistently and accurately predict future demand. If our business expands and our demand for components and materials increase beyond our estimates, our manufacturers and suppliers may be unable to meet our demand. In addition, if we or our third party manufacturers underestimate our component and material requirements, we may have inadequate inventory, which could interrupt, delay, or prevent delivery of our systems to our customers. By contrast, if we overestimate our component and material requirements, we may have excess inventory, which would increase our expenses. Any of these occurrences would negatively affect our financial performance and business results.

Shipping is a critical part of our business and any changes in our shipping arrangements or damages or losses sustained during shipping could adversely affect our business, financial condition, results of operations and prospects.

We currently rely on third party vendors for our shipping. If we are not able to negotiate acceptable pricing and other terms with these entities or they experience performance problems or other difficulties, it could negatively impact our operating results and our customers’ experience. In the past, some of our systems have sustained serious damage in transit and were not repairable. Although we have taken steps to improve our shipping containers, there is no guarantee our systems will not become damaged or lost in transit in the future. If a system is damaged in transit, it may result in a substantial delay in the fulfillment of the customer’s order, and depending on the type and extent of the damage and whether the incident is covered by insurance, it may result in a substantial financial loss. If our products are not delivered in a timely fashion or are damaged or lost during the delivery process, our customers could become dissatisfied and cease using our products or services, which would adversely affect our business, financial condition, results of operations and prospects.

Risks related to our intellectual property

If we are unable to obtain and maintain sufficient intellectual property protection for our technology, including the Berkeley Lights Platform, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be impaired.

We rely on patent protection as well as trademark, copyright, trade secret and other intellectual property rights protection and contractual restrictions to protect our proprietary technologies, all of which provide limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. If we fail to protect our intellectual property, third parties may be able to compete more effectively against us. In addition, we may incur substantial litigation costs in our attempts to recover or restrict use of our intellectual property.

To the extent our intellectual property offers inadequate protection, or is found to be invalid or unenforceable, we would be exposed to a greater risk of direct competition. If our intellectual property does not provide adequate coverage of our competitors’ products, our competitive position could be adversely affected, as could our business. Both the patent application process and the process of managing patent disputes can be time-consuming and expensive.

As is the case with other life sciences and biotechnology companies, our success depends in large part on our ability to obtain and maintain protection of the intellectual property we may own solely and jointly with others, particularly patents, in the United States and other countries with respect to our products and technologies. We apply for patents covering our products and technologies and uses thereof, as we deem appropriate. However, obtaining and enforcing patents in our industry is costly, time-consuming and complex, and we may fail to apply for patents on important products, services and technologies in a timely fashion or at all, or we may fail to

 

42


Table of Contents

apply for patents in potentially relevant jurisdictions. We may not be able to file and prosecute all necessary or desirable patent applications, or maintain, enforce and license any patents that may issue from such patent applications, at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. We may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the rights to patents licensed to third parties. Therefore, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business.

As of June 1, 2020, our owned patent assets included approximately 25 U.S. patents, 62 pending U.S. patent applications, 15 pending patent cooperation treaty, or PCT, applications, 116 foreign patents and 293 pending foreign patent applications in various foreign jurisdictions, including Australia, Canada, China, the European Union, Hong Kong, Israel, Japan, South Korea, Singapore and Taiwan. As of June 1, 2020, our in-licensed patent assets included 9 U.S. patents, 1 foreign patent, 1 pending U.S. patent application, and 1 pending foreign patent application. It is possible that none of our pending patent applications will result in issued patents in a timely fashion or at all, and even if patents are granted, they may not provide a basis for intellectual property protection of commercially viable products or services, may not provide us with any competitive advantages, or may be challenged and invalidated by third parties. It is possible that others will design around our current or future patented technologies. It is possible that in the future some of our patents, licensed patents and patent applications may be challenged at the United States Patent and Trademark Office, or USPTO, or in proceedings before the patent offices of other jurisdictions. We may not be successful in defending any such challenges made against our patents or patent applications. Any successful third party challenge to our patents could result in the unenforceability or invalidity of such patents and increased competition to our business. We may have to challenge the patents or patent applications of third parties. The outcome of patent litigation or other proceeding can be uncertain, and any attempt by us to enforce our patent rights against others or to challenge the patent rights of others may not be successful, or, if successful, may take substantial time and result in substantial cost, and may divert our efforts and attention from other aspects of our business.

The patent positions of life sciences companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in such companies’ patents has emerged to date in the United States or elsewhere. Courts frequently render opinions in the biotechnology field that may affect the patentability of certain inventions or discoveries.

Our in-licensed patent rights may be subject to a reservation of rights by one or more third parties. For example, we in-license certain patent rights from The Regents of the University of California, which were funded in part by the U.S. government. As a result, the U.S. government may have certain rights, including so-called march-in rights, to such patent rights and any products or technology developed from such patent rights. When new technologies are developed with U.S. government funding, the U.S. government generally obtains certain rights in any resulting patents, including a nonexclusive license authorizing the U.S. government to use the invention for non-commercial purposes. These rights may permit the U.S. government to disclose our confidential information to third parties and to exercise march-in rights to use or to allow third parties to use our licensed technology. The U.S. government can exercise its march-in rights if it determines that action is necessary because we fail to achieve the practical application of government-funded technology, because action is necessary to alleviate health or safety needs, to meet requirements of federal regulations, or to give preference to U.S. industry. In addition, our rights in such inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any exercise by the U.S. government of such rights could harm our business, financial condition, results of operations and prospects.

 

43


Table of Contents

Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.

Changes in either the patent laws or in interpretations of patent laws in the United States or other countries or regions may diminish the value of our intellectual property. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third party patents. We may not develop additional proprietary products, methods and technologies that are patentable.

Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. On or after March 16, 2013, under the Leahy-Smith America Invents Act, or the America Invents Act, enacted in September 16, 2011, the United States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO on or after March 16, 2013, but before us could therefore be awarded a patent covering an invention of ours even if we had made the invention before it was made by such third party. This will require us to be cognizant of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i) file any patent application related to our products or (ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications.

The America Invents Act also includes a number of significant changes that affect the way patent applications will be prosecuted and also may affect patent litigation. These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned or in-licensed patent applications and the enforcement or defense of our owned or in-licensed issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, the patent position of companies in the biotechnology field is particularly uncertain. Various courts, including the United States Supreme Court have rendered decisions that affect the scope of patentability of certain inventions or discoveries relating to biotechnology. These decisions state, among other things, that a patent claim that recites an abstract idea, natural phenomenon or law of nature (for example, the relationship between particular genetic variants and cancer) are not themselves patentable. Precisely what constitutes a law of nature or abstract idea is uncertain, and it is possible that certain aspects of our technology could be considered natural laws. Accordingly, the evolving case law in the United States may adversely affect our ability to obtain patents and may facilitate third party challenges to any owned or licensed patents.

Issued patents covering our products could be found invalid or unenforceable if challenged.

The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability. Some of our patents or patent applications (including licensed patents) have been, are being or may be challenged at a

 

44


Table of Contents

future point in time in opposition, derivation, reexamination, inter partes review, post-grant review or interference. Any successful third party challenge to our patents in this or any other proceeding could result in the unenforceability or invalidity of such patents, which may lead to increased competition to our business, which could harm our business. In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our platform technologies. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop or commercialize current or future products.

We may not be aware of all third party intellectual property rights potentially relating to our products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until approximately 18 months after filing or, in some cases, not until such patent applications issue as patents. We might not have been the first to make the inventions covered by each of our pending patent applications and we might not have been the first to file patent applications for these inventions. To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings or other post-grant proceedings declared by the USPTO that could result in substantial cost to us. The outcome of such proceedings is uncertain. No assurance can be given that other patent applications will not have priority over our patent applications. In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain. Furthermore, if third parties bring these proceedings against our patents, we could experience significant costs and management distraction.

We rely on in-licenses from third parties. If we lose these rights, our business may be materially adversely affected, our ability to develop improvements to our existing systems, workflows, consumables and reagent kits and to develop new systems, workflows, consumables and reagent kits may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation as well as the potential loss of or limitations on our ability to develop and commercialize products and technology covered by these license agreements.

We are party to a royalty-bearing license agreement with The Regents of the University of California that grants us exclusive rights to exploit certain patent rights that are related to our systems. We may need to obtain additional licenses from others to advance our research, development and commercialization activities. Our license agreement with The Regents of the University of California imposes, and we expect that any future exclusive in-license agreements will impose, various development, diligence, commercialization and other obligations on us. We have also entered into engagements in the past, and may enter into engagements in the future, with other partners and customers under which we obtain certain intellectual property rights relating to our platform and technology. These engagements take the form of exclusive license or of actual ownership of intellectual property rights or technology from third parties. Our rights to use the technology we license are subject to the continuation of and compliance with the terms of those agreements. In some cases, we may not control the prosecution, maintenance or filing of the patents to which we hold licenses, or the enforcement of those patents against third parties.

Moreover, disputes may arise with respect to our licensing or other upstream agreements, including:

 

 

the scope of rights granted under the agreements and other interpretation-related issues;

 

 

the extent to which our systems and consumables, technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

 

45


Table of Contents
 

the sublicensing of patent and other rights under our collaborative development relationships;

 

 

our diligence obligations under the license agreements and what activities satisfy those diligence obligations;

 

 

the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and

 

 

the priority of invention of patented technology.

In spite of our efforts to comply with our obligations under our in-license agreements, our licensors might conclude that we have materially breached our obligations under our license agreements and might therefore, including in connection with any aforementioned disputes, terminate the relevant license agreement, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If any such in-license is terminated, or if the licensed patents fail to provide the intended exclusivity, competitors or other third parties might have the freedom to market or develop products similar to ours. In addition, absent the rights granted to us under such license agreements, we may infringe the intellectual property rights that are the subject of those agreements, we may be subject to litigation by the licensor, and if such litigation by the licensor is successful we may be required to pay damages to our licensor, or we may be required to cease our development and commercialization activities which are deemed infringing, and in such event we may ultimately need to modify our activities or products to design around such infringement, which may be time- and resource-consuming, and which may not be ultimately successful. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects. In particular, if our license with The Regents of the University of California is terminated, we may suffer the foregoing consequences with respect to our business.

In addition, our rights to certain technologies, are licensed to us on a non-exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, certain of our agreements with third parties may provide that intellectual property arising under these agreements, such as data that could be valuable to our business, will be owned by the counterparty, in which case, we may not have adequate rights to use such data or have exclusivity with respect to the use of such data, which could result in third parties, including our competitors, being able to use such data to compete with us.

If we cannot acquire or license rights to use technologies on reasonable terms, we may not be able to commercialize new products in the future.

In the future, we may identify third party intellectual property and technology we may need to license in order to engage in our business, including to develop or commercialize new products or services, and the growth of our business may depend in part on our ability to acquire, in-license or use this technology. However, such licenses may not be available to us on acceptable terms or at all. The licensing or acquisition of third party intellectual property rights is a competitive area, and several more established companies may pursue strategies to license or acquire third party intellectual property rights that we may consider attractive or necessary. These established companies may have a competitive advantage over us due to their size, capital resources and greater development or commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. Even if such licenses are available, we may be required to pay the licensor in return for the use of such licensor’s technology, lump-sum payments, payments based on certain milestones such as sales volumes, or royalties based on sales of our platform. In addition, such licenses may be non-exclusive, which could give our competitors access to the same intellectual

 

46


Table of Contents

property licensed to us. We may also need to acquire or negotiate licenses to patents or patent applications before or after introducing a commercial product. The acquisition and licensing of third party patent rights is a competitive area, and other companies may also be pursuing strategies to acquire or license third party patent rights that we may consider attractive. We may not be able to acquire or obtain necessary licenses to patents or patent applications. Even if we are able to obtain a license to patent rights of interest, we may not be able to secure exclusive rights, in which case others could use the same rights and compete with us. Our business, financial condition, results of operations and prospects could be materially and adversely affected if we are unable to enter into necessary agreements on acceptable terms or at all, if any necessary licenses are subsequently terminated, if the licensors fail to abide by the terms of the licenses or fail to prevent infringement by third parties, or if the acquired or licensed patents or other rights are found to be invalid or unenforceable. Moreover, we could encounter delays in the introduction of products or services while we attempt to develop alternatives. Defense of any lawsuit or failure to obtain any of these licenses on favorable terms could prevent us from commercializing products, which could harm our business, financial condition, results of operations and prospects.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on our systems, workflows, consumables and reagent kits in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and we may encounter difficulties in protecting and defending such rights in foreign jurisdictions. Consequently, we may not be able to prevent third parties from practicing our inventions in some or all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products. Our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. In addition, certain countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to other parties. Furthermore, many countries limit the enforceability of patents against other parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of any patents.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biotechnology, which could make it difficult for us to stop the misappropriation or other violations of our intellectual property rights including infringement of our patents in such countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, or that are initiated against us, and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our products, services and other technologies and the enforcement of intellectual property. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

 

47


Table of Contents

If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially adversely affected and our business could be harmed.

We rely heavily on trade secrets and confidentiality agreements to protect our unpatented know-how, technology and other proprietary information, including parts of our technology platform, and to maintain our competitive position. However, trade secrets and know-how can be difficult to protect. In addition to pursuing patents on our technology, we take steps to protect our intellectual property and proprietary technology by entering into agreements, including confidentiality agreements, non-disclosure agreements and intellectual property assignment agreements, with our employees, consultants, academic institutions, corporate partners and, when needed, our advisers. However, we cannot be certain that such agreements have been entered into with all relevant parties, and we cannot be certain that our trade secrets and other confidential proprietary information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. For example, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Such agreements may not be enforceable or may not provide meaningful protection for our trade secrets or other proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements, and we may not be able to prevent such unauthorized disclosure, which could adversely impact our ability to establish or maintain a competitive advantage in the market. If we are required to assert our rights against such party, it could result in significant cost and distraction.

Monitoring unauthorized disclosure is difficult, and we do not know whether the steps we have taken to prevent such disclosure are, or will be, adequate. If we were to enforce a claim that a third party had illegally obtained and was using our trade secrets, it would be expensive and time-consuming, and the outcome would be unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets.

We also seek to preserve the integrity and confidentiality of our confidential proprietary information by maintaining physical security of our premises and physical and electronic security of our information technology systems, but it is possible that these security measures could be breached. If any of our confidential proprietary information were to be lawfully obtained or independently developed by a competitor or other third party, absent patent protection, we would have no right to prevent such competitor from using that technology or information to compete with us, which could harm our competitive position. If any of our trade secrets were to be disclosed to or independently discovered by a competitor or other third party, it could harm our business, financial condition, results of operations and prospects.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We have employed and expect to employ individuals who were previously employed at universities or other companies, including our competitors or potential competitors. Although we try to ensure that our employees, consultants, advisors and independent contractors do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that our employees, advisors, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information of their former employers or other third parties, or to claims that we have improperly used or obtained such trade secrets. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights and face increased competition to our business. A loss of key research personnel work product could hamper or prevent our ability to commercialize potential products, which could harm our

 

48


Table of Contents

business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. The assignment of intellectual property rights may not be self-executing, or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property. Any of the foregoing could harm our business, financial condition, results of operations and prospects.

We may not be able to protect and enforce our trademarks and trade names, or build name recognition in our markets of interest thereby harming our competitive position.

The registered or unregistered trademarks or trade names that we own may be challenged, infringed, circumvented, declared generic, lapsed or determined to be infringing on or dilutive of other marks. We may not be able to protect our rights in these trademarks and trade names, which we need in order to build name recognition. In addition, third parties have filed, and may in the future file, for registration of trademarks similar or identical to our trademarks, thereby impeding our ability to build brand identity and possibly leading to market confusion. If they succeed in registering or developing common law rights in such trademarks, and if we are not successful in challenging such rights, we may not be able to use these trademarks to develop brand recognition of our technologies, products or services. In addition, there could be potential trade name or trademark infringement claims brought by owners of other registered trademarks or trademarks that incorporate variations of our registered or unregistered trademarks or trade names. Further, we have and may in the future enter into agreements with owners of such third party trade names or trademarks to avoid potential trademark litigation which may limit our ability to use our trade names or trademarks in certain fields of business.

We have not yet registered certain of our trademarks in all of our potential markets, although we have registered Beacon, Berkeley Lights and the Berkeley Lights logo in the United States as well as certain of our trademarks outside of the United States. If we apply to register these trademarks in other countries, and/or other trademarks in the United States and other countries, our applications may not be allowed for registration in a timely fashion or at all; and further, our registered trademarks may not be maintained or enforced. For example, we have not been able to obtain the registration of the marks Berkeley Lights, Beacon and Lightning in certain foreign jurisdictions, including China. In addition, opposition or cancellation proceedings have been, or may in the future be, filed against our trademark applications and registrations, and our trademarks may not survive such proceedings. For example, an opposition was filed against our Beacon trademark application in 2017 in the United States, which was amicably resolved, and an opposition was filed in the European Union and a request to extend the opposition period in the United States related to our Lightning trademark application in 2019. In addition, third parties may file first for our trademarks in certain countries. If they succeed in registering such trademarks, and if we are not successful in challenging such third party rights, we may not be able to use these trademarks to market our products and technologies in those countries. If we do not secure registrations for our trademarks, we may encounter more difficulty in enforcing them against third parties than we otherwise would. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, which could harm our business, financial condition, results of operations and prospects. And, over the long-term, if we are unable to establish name recognition based on our trademarks, then our marketing abilities may be materially adversely impacted.

 

49


Table of Contents

We may be subject to claims challenging the inventorship of our patents and other intellectual property.

We or our licensors may be subject to claims that former employees, collaborators or other third parties have an interest in our owned or in-licensed patents, trade secrets or other intellectual property as an inventor or co-inventor. For example, we or our licensors may have inventorship disputes arise from conflicting obligations of employees, consultants or others who are involved in developing our products. Litigation may be necessary to defend against these and other claims challenging inventorship of our or our licensors’ ownership of our owned or in-licensed patents, trade secrets or other intellectual property. If we or our licensors fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, intellectual property that is important to our systems, including our software, workflows, consumables and reagent kits. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees, and certain customers or partners may defer engaging with us until the particular dispute is resolved. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

We are and in the future may be involved in litigation related to intellectual property, which could be time-intensive and costly and may adversely affect our business, financial condition, results of operations and prospects.

In recent years, there has been significant litigation in the United States involving intellectual property rights. We are and may in the future be involved with litigation or actions at the USPTO with various third parties that claim we or our partners or customers using our solutions and services have misappropriated or misused other parties’ intellectual property rights. We expect that the number of such claims may increase as the number of our systems, workflows, consumables and reagent kits, and the level of competition in our industry segments, grow. Any infringement claim, regardless of its validity, could harm our business by, among other things, resulting in time-consuming and costly litigation, diverting management’s time and attention from the development of the business, requiring the payment of monetary damages (including treble damages, attorneys’ fees, costs and expenses) or royalty payments, or result in potential or existing customers delaying purchases of our products or entering into engagements with us pending resolution of the dispute.

As we move into new markets and applications for our platform, incumbent participants in such markets may assert their patents and other proprietary rights against us as a means of slowing our entry into such markets or as a means to extract substantial license and royalty payments from us. Our competitors and others may now and, in the future, have significantly larger and more mature patent portfolios than we currently have. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product or service revenue and against whom our own patents may provide little or no deterrence or protection. Therefore, our commercial success may depend in part on our non-infringement of the patents or proprietary rights of third parties, or the invalidity of such patents or proprietary rights.

Our research, development and commercialization activities may in the future be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. There is a substantial amount of litigation and other patent challenges, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology industry, including patent infringement lawsuits, interferences, oppositions and inter partes review proceedings before the USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products. As the biotechnology industry expands and more patents are issued, the risk increases that our products may be subject to claims of infringement of the patent rights of third parties. Numerous significant intellectual property issues have been litigated, are being litigated and will likely continue to be litigated, between existing and new

 

50


Table of Contents

participants in our existing and targeted markets, and one or more third parties may assert that our products or services infringe their intellectual property rights as part of a business strategy to impede our successful entry into or growth in those markets.

Third parties may assert that we are employing their proprietary technology without authorization. We are also aware of issued U.S. patents and patent applications with subject matter related to our systems, workflows, consumables and reagent kits, and there may be other related third party patents or patent applications of which we are not aware. For example, we are aware of a third party U.S. issued patent that could possibly be construed to cover a part of one of our assay kits. In addition, we have received in the past, and may receive in the future, correspondence from third parties referring to the relevance of such third parties’ intellectual property to our technology, our workflows or our advanced automated systems, and we are currently engaged in litigation with one such third party, AbCellera. Furthermore, our customers have received in the past, and may receive in the future, correspondence from third parties referring to the relevance of such third parties’ intellectual property to our technology, our workflows or our advanced automated systems. Because patent applications can take many years to issue, there may be currently pending patent applications which may later result in issued patents that our current or future products and services may infringe. In addition, similar to what other companies in our industry have experienced, we expect our competitors and others may have patents or may in the future obtain patents and claim that making, having made, using, selling, offering to sell or importing our platform, or the systems, workflows, consumables and reagent kits that comprise our platform, infringes these patents. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that could cover our platforms, including our systems, workflows, consumables and reagent kits. Under the applicable law of certain jurisdictions, the scope of a patent claim is determined by an interpretation of the law, the written disclosure in a patent and the patent’s prosecution history. Our interpretation of the relevance or the scope of a patent or a pending application may be incorrect, which may negatively impact our ability to market our products. We may incorrectly determine that our products are not covered by a third party patent or may incorrectly predict whether a third party’s pending application will issue with claims of relevant scope. Our determination of the expiration date of any patent in the United States or abroad that we consider relevant may be incorrect, which may negatively impact our ability to develop and market our products.

There can be no assurance that we will prevail in any suit initiated against us by third parties, successfully settle or otherwise resolve patent infringement claims. Third parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and sell products or services, and could result in the award of substantial damages against us, including treble damages, attorney’s fees, costs and expenses if we are found to have willfully infringed. In the event of a successful claim of infringement against us, we may be required to pay damages and ongoing royalties, and obtain one or more licenses from third parties, or be prohibited from selling certain products or services. We may not be able to obtain these licenses on acceptable or commercially reasonable terms, if at all, or these licenses may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. In addition, we could encounter delays and incur significant costs, in product or service introductions while we attempt to develop alternative products or services, or redesign our products or services, to avoid infringing third party patents or proprietary rights. Defense of any lawsuit or failure to obtain any of these licenses or to develop a workaround could prevent us from commercializing products or services, and the prohibition of sale or the threat of the prohibition of sale of any of our products or services could materially affect our business and our ability to gain market acceptance for our products or services.

In addition, our agreements with some of our customers, suppliers or other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims, including the types of claims described above. We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we are required or agree to defend or indemnify third parties in connection with any

 

51


Table of Contents

infringement claims, we could incur significant costs and expenses that could adversely affect our business, financial condition, results of operations and prospects.

Claims by AbCellera that we infringe their intellectual property rights may adversely affect our business, financial condition, results of operations and prospects.

On July 9, 2020, AbCellera filed a complaint in the United States District Court for the District of Delaware, alleging that we have infringed and continue to infringe, directly and indirectly, the following patents exclusively licensed by AbCellera by making, using, offering for sale, selling and/or importing our Beacon and Culture Station systems and the OptoSelect chips, and our sale of the Opto Plasma B Discovery Workflow: U.S. Patent Nos. 10,107,812, 10,274,494, 10,466,241, 10,578,618, 10,697,962, 10,087,408, 10,421,936 and 10,704,018. AbCellera is seeking, among other things, judgment of infringement, a permanent injunction and damages (including lost profits, a reasonable royalty, reasonable costs and attorney’s fees and treble damages for willful infringement). This lawsuit remains pending.

While we believe that the patent assertions by AbCellera are without merit and we intend to defend ourselves vigorously, outcomes in litigation can be uncertain and it is possible a court may disagree with our position. An adverse determination in this litigation could subject us to significant liabilities, require us to seek licenses from or pay royalties to AbCellera or prevent us from manufacturing, selling or using certain of our products, any of which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.

Litigation or other legal proceedings relating to intellectual property claims, even if resolved in our favor, may cause us to incur substantial costs and divert the attention of our management and technical personnel from their normal responsibilities in defending against any of these claims. Parties making claims against us may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Such litigation or proceedings could substantially increase our operating costs and reduce the resources available for development activities or any future sales, marketing, or distribution activities. We may not have sufficient financial or other resources to conduct such litigation or proceedings adequately. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Uncertainties resulting from the initiation and continuation of intellectual property proceedings could harm our ability to compete in the marketplace. In addition, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Any of the foregoing could harm our business, financial condition, results of operations and prospects.

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

Third parties, including our competitors, could be infringing, misappropriating or otherwise violating our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly. From time to time, we seek to analyze our competitors’ products and services, and may in the future seek to enforce our rights against potential infringement, misappropriation or violation of our intellectual property. However, the steps we have taken to protect our proprietary rights may not be adequate to enforce our rights as against such infringement, misappropriation or violation of our intellectual property. We may not be able to detect unauthorized use of, or take appropriate steps to enforce, our intellectual property rights. Any inability to meaningfully enforce our intellectual property rights could harm our ability to compete and reduce demand for our products and services.

 

52


Table of Contents

Litigation may be necessary for us to enforce our patent and proprietary rights or to determine the scope, coverage and validity of the proprietary rights of others. We are currently engaged in a lawsuit with AbCellera based upon allegations of our infringement of intellectual property rights and we may become involved in additional lawsuits in the future. If we do not prevail in such legal proceedings, we may be required to pay damages, we may lose significant intellectual property protection for our products or services, such that competitors could copy our products or services and we could be forced to cease commercialization of certain of our products or services. Any litigation that may be necessary in the future could result in substantial costs and diversion of resources and could have a material adverse effect on our business, financial condition, results of operations and prospects. In any lawsuit we bring to enforce our intellectual property rights, a court may refuse to the stop the other party from using the technology at issue on grounds that our intellectual property rights do not cover the technology in question. Further, in such proceedings, the defendant could counterclaim that our intellectual property is invalid or unenforceable and the court may agree, in which case we could lose valuable intellectual property rights. The outcome in any such lawsuits are unpredictable. Even if we do prevail in any future litigation related to intellectual property rights, the cost and time requirements of the litigation could negatively impact our financial results.

Obtaining and maintaining our patent protection depends on compliance with various required procedures, document submissions, fee payments and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the USPTO and various governmental patent agencies outside of the United States at several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we engage an outside service and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors may be able to enter the market without infringing our patents and this circumstance would have a material adverse effect on our business.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our products are obtained, once the patent life has expired, we may be open to competition from competitive products. If one of our products requires extended development, testing and/or regulatory review, patents protecting such products might expire before or shortly after such products are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.

Our use of open source software could compromise our ability to offer our services and subject us to possible litigation.

We use open source software in connection with our products and services. Companies that incorporate open source software into their products have, from time to time, faced claims challenging their use of open source software and compliance with open source license terms. As a result, we could be subject to lawsuits by parties

 

53


Table of Contents

claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source software to publicly disclose all or part of the source code to the licensee’s software that incorporates, links or uses such open source software, and make available to third parties for no cost, any derivative works of the open source code created by the licensee, which could include the licensee’s own valuable proprietary code. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms are often ambiguous. There is little legal precedent in this area and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. Any of the foregoing could harm our business, financial condition, results of operations and prospects.

Risks related to our common stock and this offering

There has been no prior public market for our common stock and an active trading market may not develop.

Prior to this offering, there has been no public market for our common stock. An active trading market may not develop following completion of this offering or, if developed, may not be sustained. The lack of an active trading market may impair the value of your shares and your ability to sell your shares at the time you wish to sell them. An inactive trading market may also impair our ability to raise capital by selling shares of common stock or to acquire other complementary products, technologies or businesses by using our shares of common stock as consideration.

Upon closing of this offering, we expect that our common stock will be listed on the Nasdaq Global Market. If we fail to satisfy the continued listing standards of Nasdaq, however, we could be de-listed, which would negatively impact the price of our common stock.

We expect that the price of our common stock will fluctuate substantially and you may not be able to sell the shares you purchase in this offering at or above the offering price.

The initial public offering price for the shares of our common stock sold in this offering is determined by negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our common stock following this offering. In addition, the market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including:

 

 

actual or anticipated fluctuations in our financial condition and operating results, including fluctuations in our quarterly and annual results;

 

 

the introduction of new products or product enhancements by us or others in our industry;

 

 

variances in product and system reliability;

 

 

overall conditions in our industry and the markets in which we operate;

 

 

disputes or other developments with respect to our or others’ intellectual property rights;

 

 

actual or anticipated changes in our operating results or growth rate as a result of our competitors’ operating results;

 

 

our ability to develop, obtain any required regulatory clearance or approval for, and market new and enhanced products on a timely basis;

 

54


Table of Contents
 

fluctuations in the valuation of companies perceived by investors to be comparable to us;

 

 

product liability claims or other litigation;

 

 

announcement or expectation of additional financing effort;

 

 

sales of our common stock by us or our stockholders;

 

 

share price and volume fluctuations attributable to inconsistent trading volume levels of our shares;

 

 

media exposure of our products or of those of others in our industry;

 

 

changes in applicable governmental regulations or in the status of our regulatory approvals or applications;

 

 

changes in earnings estimates or recommendations by securities analysts; and

 

 

general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of listed companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following this offering. If the market price of shares of our common stock after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.

In addition, in the past, class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management’s attention and resources from our business.

Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price or trading volume to decline.

If a trading market for our common stock develops, the trading market will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with us or our industry, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of us or fail to publish reports covering us regularly, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.

We are an “emerging growth company” and the reduced disclosure requirements applicable to “emerging growth companies” may make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth company,” we will not

 

55


Table of Contents

be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; we will be exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements; we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.

In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We may remain an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of this initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1.07 billion in annual revenue in any fiscal year, (ii) the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 or (iii) we issue more than $1.0 billion of non-convertible debt over a three-year period.

The exact implications of the JOBS Act are subject to interpretations and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common stock less attractive to the extent we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may decline or become more volatile.

If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our operating results could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. If our assumptions change or if actual circumstances differ from our assumptions, our operating results may be adversely affected and could fall below our publicly announced guidance or the expectations of securities analysts and investors, resulting in a decline in the market price of our common stock.

If you purchase our common stock in this offering, you will incur immediate and substantial dilution in the book value of your shares.

Investors purchasing common stock in this offering will pay a price per share that substantially exceeds the pro forma as adjusted net tangible book value per share. As a result, investors purchasing common stock in this offering will incur immediate dilution of $13.87 per share, the difference between the assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and our pro forma as adjusted net tangible book value per share as of March 31, 2020 after giving effect to this offering. For more information on the dilution you may suffer as a result of investing in this

 

56


Table of Contents

offering, see the section of this prospectus entitled “Dilution.” This dilution is due to the substantially lower price paid by our investors who purchased shares prior to this offering as compared to the price offered to the public in this offering and the exercise prices of stock options granted to our employees and our outstanding warrant. The exercise of any of these options or warrant would result in additional dilution.

A significant portion of our total outstanding shares are restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell their shares, could result in a decrease in the market price of our common stock. Immediately after this offering, we will have outstanding 60,943,919 shares of common stock based on the number of shares outstanding as of March 31, 2020. This includes the shares that we are selling in this offering, which may be resold in the public market immediately without restriction, unless purchased by our affiliates. Of the remaining shares, 53,543,919 shares are currently restricted as a result of securities laws, 180-day market stand-off provisions in agreements with us or 180-day lock-up agreements with the underwriters, but will be able to be sold after the offering as described in the section of this prospectus entitled “Shares eligible for future sale.” Moreover, after this offering, holders of an aggregate of up to 50,462,272 shares of our common stock issuable upon the conversion of the shares of our convertible preferred stock and the holder of our outstanding warrant to purchase 136,519 shares of our common stock, will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders as described in the section of this prospectus entitled “Description of capital stock—Registration rights.” We also intend to register all shares of common stock that we may issue under our equity compensation plans. Once we register these shares, they can be freely sold in the public market, subject to volume limitations applicable to affiliates and the lock-up agreements described in the section of this prospectus entitled “Underwriting.”

Our directors, officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.

After this offering, our executive officers, directors and principal stockholders each holding more than 5% of our common stock will collectively control approximately 64% of our outstanding common stock. As a result, these stockholders, if they act together, will be able to control the management and affairs of our company and most matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change of control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interests of our other stockholders.

We may allocate the net proceeds from this offering in ways that you and other stockholders may not approve.

Our management will have broad discretion in the application of the net proceeds from this offering, including for any of the purposes described in the section titled “Use of proceeds.” Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment, and the failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected results, which could cause our stock price to decline.

 

57


Table of Contents

We expect to incur significant additional costs as a result of being a public company, which may adversely affect our business, financial condition, results of operations and prospects.

Upon completion of this offering, we expect to incur costs associated with corporate governance requirements that will become applicable to us as a public company, including rules and regulations of the SEC, under the Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, as well as the rules of Nasdaq. These rules and regulations are expected to significantly increase our accounting, legal and financial compliance costs and make some activities more time-consuming. We also expect these rules and regulations to make it more expensive for us to maintain directors’ and officers’ liability insurance. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. Accordingly, increases in costs incurred as a result of becoming a publicly-traded company may adversely affect our business, financial condition, results of operations and prospects.

If we experience material weaknesses in the future or otherwise fail to implement and maintain an effective system of internal controls in the future, we may not be able to accurately report our financial condition or results of operations which may adversely affect investor confidence in us and, as a result, the value of our common stock.

As a result of becoming a public company, we will be required, under Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the year ended December 31, 2021. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.

The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation. To comply with the requirements of being a reporting company under the Exchange Act, including performing the evaluation needed to comply with Section 404, we will need to implement additional financial and management controls, reporting systems and procedures and hire additional accounting and finance staff. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. The effectiveness of our controls and procedures may be limited by a variety of factors, including:

 

 

faulty human judgment and simple errors, omissions or mistakes;

 

 

fraudulent action of an individual or collusion of two or more people;

 

 

inappropriate management override of procedures; and

 

 

the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.

We cannot assure you that there will not be material weaknesses in our internal control over financial reporting in the future. Any failure to implement and maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent

 

58


Table of Contents

registered public accounting firm determines we have a material weakness in our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

When we cease to be an “emerging growth company” under the JOBS Act, our auditors will be required to express an opinion on the effectiveness of our internal controls, unless we are then eligible for any other exemption from such requirement. If we are unable to confirm that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline.

Provisions in our corporate charter documents and under Delaware law could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our current management.

Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. Among others, these provisions include that:

 

 

our board of directors has the right to expand the size of our board of directors and to elect directors to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

 

 

our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered three-year terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

 

 

our stockholders may not act by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

 

 

a special meeting of stockholders may be called only by the chair of the board of directors, the chief executive officer, or a majority of the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

 

 

our amended and restated certificate of incorporation prohibits cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

 

 

our board of directors may alter our bylaws without obtaining stockholder approval;

 

 

the required approval of the holders of at least two-thirds of the voting power of all of the then outstanding shares of voting stock to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;

 

59


Table of Contents
 

stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of our company; and

 

 

our board of directors is authorized to issue shares of preferred stock and to determine the terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.

Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation that will become effective upon the closing of this offering specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders; provided that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, these provisions may have the effect of discouraging lawsuits against our directors and officers. The choice of forum provision requiring that the Court of Chancery of the State of Delaware be the exclusive forum for certain actions would not apply to suits brought to enforce any liability or duty created by the Exchange Act.

There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find these types of provisions to be inapplicable or unenforceable, and if a court were to find the exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could materially adversely affect our business.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. Any future determination related to dividend policy will be made at the discretion of our board of directors, subject to applicable laws and the restrictions set forth in any of our contractual agreements, and will depend upon, among other factors, our

 

60


Table of Contents

results of operations, financial condition, contractual restrictions and capital requirements. In particular, unless waived, the terms of our loan and security agreement with East West Bank generally prohibit us from declaring or paying any cash dividends and making any other distributions. In addition, any future debt or preferred securities or future debt agreements we may enter may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Our ability to use our net operating losses and certain other tax attributes may be limited.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a cumulative change of more than 50 percentage points (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We have experienced at least one ownership change in the past, and we may experience ownership changes in the future as a result of shifts in our stock ownership (some of which shifts are outside our control), including in connection with this offering. As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset such taxable income may be subject to limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. As a result, even if we attain profitability, we may be unable to use a material portion of our NOL carryforwards and other tax attributes, which could adversely affect our future cash flows.

 

61


Table of Contents

Special note regarding forward-looking statements

This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business, operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These forward-looking statements include, but are not limited to, statements about:

 

 

estimates of our addressable market, market growth, future revenue, key performance indicators, expenses, capital requirements and our needs for additional financing;

 

 

the implementation of our business model and strategic plans for our products, workflows and technologies;

 

 

our ability to successfully implement alternative non-direct purchase channels, including subscription and partnership offerings and the design of any such alternatives;

 

 

our expectations regarding the rate and degree of market acceptance of our platform;

 

 

competitive companies and technologies and our industry;

 

 

our ability to manage and grow our business by expanding our sales to existing customers or introducing our products and workflows to new customers;

 

 

our ability to develop and commercialize new products and workflows;

 

 

our ability to establish and maintain intellectual property protection for our products and workflows or avoid or defend claims of infringement, including with respect to our intellectual property litigation with AbCellera;

 

 

the performance of third party manufacturers and suppliers;

 

 

the potential effects of government regulation;

 

 

our ability to hire and retain key personnel and to manage our future growth effectively;

 

 

our ability to obtain additional financing in this or future offerings;

 

 

the volatility of the trading price of our common stock;

 

 

our ability to attract and retain key scientific and engineering personnel;

 

 

our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;

 

 

our expectations regarding use of proceeds from this offering; and

 

 

our expectations about market trends.

Forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks,

 

62


Table of Contents

uncertainties and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all.

Factors that may cause actual results to differ materially from current expectations include, among other things, those described in the section entitled “Risk factors” and elsewhere in this prospectus. Potential investors are urged to consider these factors carefully in evaluating these forward-looking statements. These forward-looking statements speak only as of the date of this prospectus. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks and other information we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See “Where you can find more information.”

 

63


Table of Contents

Market, industry and other data

This prospectus contains estimates, projections and other information concerning our industry, our business and the markets for our products, including data regarding the estimated size of those markets, their projected growth rates, the perceptions and preferences of potential customers, as well as market research, estimates and forecasts prepared by our management. We obtained the industry, market and other data throughout this prospectus from our own internal estimates and research, as well as from publicly available information, industry publications and research, surveys and studies conducted by third-parties, including governmental agencies. All of the market and industry data in this prospectus involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such information. We have not independently verified any third party information and cannot assure you of its accuracy or completeness. Although we are responsible for all of the disclosure contained in this prospectus, and we believe the market position, market opportunity, market size and other information included in this prospectus is reliable, such information is inherently imprecise.

Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information based on various factors, including those discussed in “Risk factors.”

 

64


Table of Contents

Use of proceeds

We estimate that the net proceeds to us from this offering will be approximately $114.0 million, or $131.5 million if the underwriters exercise in full their option to purchase up to 1,110,000 additional shares of common stock, assuming an initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $6.9 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) the net proceeds to us by approximately $15.8 million, assuming that the assumed initial public offering price remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The principal purpose of this offering is to create a public market for our common stock and enable access to the public equity markets for us and our stockholders.

As of March 31, 2020, we had cash and cash equivalents of $70.3 million. We currently expect to use our net proceeds from this offering, together with our existing cash and cash equivalents, for general corporate purposes, including working capital, and funding our research and development and sales and marketing activities. We may also use a portion of the remaining net proceeds, if any, to acquire complementary businesses, products, services or technologies, including scientific expertise. However, we do not have agreements or commitments for any acquisitions at this time.

This expected use of the net proceeds from this offering represents our intentions based on our current plans and business conditions, which intentions could change in the future as our plans and business conditions evolve. Our management will have broad discretion over the uses of the net proceeds from this offering, and our investors will be relying on the judgment of our management regarding the application of the net proceeds of this offering.

Based on our current business plan, we believe the net proceeds from this offering, together with our existing cash and cash equivalents and anticipated cash flow from operations, will be sufficient to meet our anticipated cash requirements for at least the 12 months from the date of this prospectus. After this offering, we will need to raise additional capital in order to fund our existing operations, improve our platform or develop and commercialize new products, workflows, consumables and reagent kits, or expand our operations. For additional information regarding our potential capital requirements, see “Risk factors—We will need to raise additional capital to fund our existing operations, improve our platform or develop and commercialize new products, workflows, consumables and reagent kits, or expand our operations.”

Pending the uses described above, we plan to invest the net proceeds from this offering in short and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

 

65


Table of Contents

Dividend policy

We have never declared or paid any cash dividends on our common stock, and we do not currently intend to pay any cash dividends on our common stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to support operations and to finance the growth and development of our business. Any future determination related to dividend policy will be made at the discretion of our board of directors, subject to applicable laws and the restrictions set forth in any of our contractual agreements, and will depend upon, among other factors, our results of operations, financial condition, contractual restrictions and capital requirements. In particular, unless waived, the terms of our loan and security agreement with East West Bank generally prohibit us from declaring or paying any cash dividends and making other distributions. Our future ability to pay cash dividends on our common stock may also be limited by the terms of any future debt or preferred securities we may issue or any future credit facilities we may enter into.

 

66


Table of Contents

Capitalization

The following table sets forth our cash and cash equivalents and capitalization as of March 31, 2020:

 

 

on an actual basis;

 

 

on a pro forma basis to reflect: (i) the conversion of all of the outstanding shares of our convertible preferred stock as of March 31, 2020 into an aggregate of 50,462,272 shares of common stock immediately prior to the completion of this offering; and (ii) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering; and

 

 

on a pro forma as adjusted basis, giving effect to the pro forma adjustments described above, and to give further effect to the issuance and sale of 7,400,000 shares of common stock in this offering at an assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The pro forma and pro forma as adjusted information below is illustrative only, and our capitalization following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this information together with our consolidated financial statements and related notes appearing elsewhere in this prospectus and the information set forth under the headings “Use of proceeds,” “Selected consolidated financial data” and “Management’s discussion and analysis of financial condition and results of operations.”

 

   
     As of March 31, 2020  
(in thousands, except for share and per share amounts)    Actual     Pro forma     Pro forma as
adjusted(1)
 
     (unaudited)     (unaudited)     (unaudited)  

Cash and cash equivalents

   $ 70,306     $ 70,306     $ 184,300  
  

 

 

 

Total debt, less current portion

   $ 19,843     $ 19,843     $ 19,843  

Stockholders’ equity:

      

Convertible preferred stock, $0.00005 par value per share; 101,648,657 shares authorized, 50,462,272 shares issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

     224,769              

Preferred stock, $0.00005 par value per share; no shares authorized, issued and outstanding, actual; 10,000,000 shares authorized, no shares issued or outstanding, pro forma and pro forma as adjusted (unaudited)

                  

Common stock, $0.00005 par value per share; 130,600,000 shares authorized, 3,081,647 shares issued and outstanding, actual; 130,600,000 shares authorized, 53,543,919 shares issued and outstanding, pro forma; 300,000,000 shares authorized, 60,943,919 shares issued and outstanding, pro forma as adjusted (unaudited)

           3       3  

Additional paid-in capital

     10,636       235,402       349,396  

Accumulated deficit

     (158,725     (158,725     (158,725
  

 

 

 

Total stockholders’ equity

     76,680       76,680       190,674  
  

 

 

 

Total capitalization

   $ 96,523     $ 96,523     $ 210,517  

 

 

 

67


Table of Contents
(1)   Each $1.00 increase (decrease) in the assumed initial public offering of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $6.9 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of shares offered by us would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $15.8 million, assuming that the assumed initial price to the public remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

The number of shares of our common stock to be outstanding after this offering reflected in the table above is based on 53,543,919 shares of our common stock outstanding as of March 31, 2020, which includes 50,462,272 shares of our common stock issuable upon the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2020 and excludes:

 

 

10,456,747 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2020, having a weighted-average exercise price of $5.20 per share;

 

 

28,000 shares of common stock issuable upon the exercise of stock options granted after March 31, 2020, with a weighted-average exercise price of $10.80 per share;

 

 

904,693 shares of common stock that were reserved for future issuance as of March 31, 2020 under our 2011 Plan (without giving effect to the issuance of stock options to purchase 28,000 shares of common stock subsequent to March 31, 2020 described above), which will become available for issuance under our 2020 Plan upon the effectiveness of the 2020 Plan;

 

 

136,519 shares of common stock issuable upon the exercise of an outstanding warrant to purchase shares of our convertible preferred stock that will convert into a warrant exercisable for an equal number of shares of common stock immediately prior to the completion of this offering, as of March 31, 2020, with an exercise price of $5.86 per share;

 

 

6,750,000 shares of common stock reserved for future issuance under the 2020 Plan, which will become effective on the day prior to the first public trading date of our common stock, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, of which options to purchase 635,000 shares of common stock at an exercise price equal to the initial public offering price set forth on the cover of this prospectus will be granted to certain of our employees and a member of our board of directors coincident with this offering; and

 

 

612,150 shares of common stock reserved for future issuance under the ESPP, which will become effective on the day prior to the first public trading date of our common stock, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan.

 

68


Table of Contents

Dilution

If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

Historical net tangible book value per share represents our total tangible assets less our total liabilities divided by the total number of shares of common stock outstanding. As of March 31, 2020, our historical net tangible book value was $76.7 million, or $24.88 per share, based on 3,081,647 shares of common stock outstanding as of that date. Our pro forma net tangible book value as of March 31, 2020 was $76.7 million, or $1.43 per share, after giving effect to: (i) the conversion of all of the outstanding shares of our convertible preferred stock as of March 31, 2020 into an aggregate of 50,462,272 shares of common stock immediately prior to the completion of this offering; and (ii) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the completion of this offering.

After giving effect to receipt of the net proceeds from our sale of 7,400,000 shares of common stock in this offering at an assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of March 31, 2020 would have been $190.7 million, or $3.13 per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $1.70 per share to our existing stockholders and an immediate dilution of $13.87 per share to new investors participating in this offering.

The following table illustrates this dilution to new investors on a per share basis:

 

Assumed initial public offering price per share           $17.00  

Historical net tangible book value per share as of March 31, 2020

   $ 24.88                     

Pro forma decrease in net tangible book value per share

     (23.45  
  

 

 

   

Pro forma net tangible book value per share as of March 31, 2020 as of March 31, 2020 attributable to the pro forma transactions described above

     1.43    

Increase in pro forma net tangible book value per share attributable to new investors participating in this offering

     1.70    
  

 

 

   

Pro forma as adjusted net tangible book value per share after this offering

       3.13  
    

 

 

 

Dilution per share to new investors participating in this offering

     $ 13.87  

 

 

Each $1.00 increase (decrease) in the assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted net tangible book value by $0.11 per share and the dilution per share to new investors by $0.89 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

We may also increase or decrease the number of shares we are offering. Assuming the assumed initial public price of $17.00 per share (which is the midpoint of the price range set forth on the cover of this prospectus) remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, each increase of 1,000,000 in the number of shares we are offering would increase our pro forma as adjusted net tangible book value as of March 31, 2020 after this offering by $15.8 million, or $0.20 per share, and would decrease dilution to investors in this offering by $0.20 per share, and a decrease of 1,000,000 in the number of shares we are offering would decrease our pro forma as adjusted net tangible book

 

69


Table of Contents

value as of March 31, 2020 after this offering by $15.8 million, or $0.21 per share, and would increase dilution to investors in this offering by $0.21 per share. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

If the underwriters’ option to purchase additional shares in this offering is exercised in full, the pro forma as adjusted net tangible book value would be $3.36 per share, and the dilution to new investors participating in this offering would be $13.64 per share.

To the extent that outstanding stock options or warrants with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share are exercised, new investors will experience further dilution. In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

The table below summarizes, as of March 31, 2020, on the pro forma as adjusted basis described above, the number of shares of our common stock, the total consideration and the average price per share (i) paid to us by our existing stockholders and (ii) to be paid by investors participating in this offering at an assumed initial public offering price of $17.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

       
     Shares purchased      Total consideration      Average  price
per share
 
      Number      Percent      Amount      Percent  

Existing stockholders

     53,543,919        87.9%      $ 224,802,503        64.1%      $ 3.92  

New investors

     7,400,000        12.1           125,800,000        35.9           17.00  
  

 

 

    

Total

     60,943,919        100%      $ 350,602,503        100%     

 

 

If the underwriters exercise their option to purchase additional shares in full, our existing stockholders would own 86.3% and our new investors would own 13.7% of the total number of shares of our common stock outstanding upon the completion of this offering.

The foregoing discussion and tables above (other than the historical net tangible book value calculation) are based on 53,543,919 shares of our common stock outstanding as of March 31, 2020, which includes 50,462,272 shares of our common stock issuable upon the conversion of all outstanding shares of our convertible preferred stock as of March 31, 2020 and excludes:

 

 

10,456,747 shares of common stock issuable upon the exercise of options outstanding as of March 31, 2020, having a weighted-average exercise price of $5.20 per share;

 

 

28,000 shares of common stock issuable upon the exercise of stock options granted after March 31, 2020, with a weighted-average exercise price of $10.80 per share;

 

 

904,693 shares of common stock that were reserved for future issuance as of March 31, 2020 under our 2011 Plan (without giving effect to the issuance of stock options to purchase 28,000 shares of common stock subsequent to March 31, 2020 described above), which will become available for issuance under our 2020 Plan upon the effectiveness of the 2020 Plan;

 

 

136,519 shares of common stock issuable upon the exercise of an outstanding warrant to purchase shares of our convertible preferred stock that will convert into a warrant exercisable for an equal number of shares of

 

70


Table of Contents
 

common stock immediately prior to the completion of this offering, as of March 31, 2020, with an exercise price of $5.86 per share;

 

 

6,750,000 shares of common stock reserved for future issuance under the 2020 Plan, which will become effective on the day prior to the first public trading date of our common stock, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, of which options to purchase 635,000 shares of common stock at an exercise price equal to the initial public offering price set forth on the cover of this prospectus will be granted to certain of our employees and a member of our board of directors coincident with this offering; and

 

 

612,150 shares of common stock reserved for future issuance under the ESPP, which will become effective on the day prior to the first public trading date of our common stock, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan.

To the extent any of the outstanding options or warrants described above are exercised, new options or warrants are issued or we issue additional shares of common stock or other equity or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

 

71


Table of Contents

Selected consolidated financial data

The following tables set forth our selected consolidated financial data for the periods and as of the dates indicated. The consolidated statements of operations data for the years ended December 31, 2018 and 2019, and the selected consolidated balance sheet data as of December 31, 2018 and 2019, are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. The selected consolidated statements of operations data for the three months ended March 31, 2019 and 2020, and the selected consolidated balance sheet data as of March 31, 2020 are derived from our unaudited consolidated interim financial statements and related notes included elsewhere in this prospectus. Our unaudited consolidated interim financial statements were prepared in accordance with generally accepted accounting principles in the United States, or GAAP, on the same basis as our audited consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, that are necessary for the fair presentation of the financial information set forth in those financial statements. Our historical results are not necessarily indicative of our future results for any period and our results for the three months ended March 31, 2020 are not necessarily indicative of results expected for the year ending December 31, 2020. You should read this data together with our audited consolidated financial statements and related notes included elsewhere in this prospectus and the information under the caption “Management’s discussion and analysis of financial condition and results of operations.” The selected consolidated financial data included in this section are not intended to replace the audited consolidated financial statements and related notes included elsewhere in this prospectus.

 

     
     Year ended December 31,     Three months ended March 31,  
(in thousands, except share and per share data)    2018     2019     2019     2020  
                 (unaudited)  

Consolidated statements of operations and comprehensive loss data:

        

Revenue:

        

Product revenue

   $ 22,882     $ 43,460     $ 9,527     $ 10,683  

Service revenue

     8,417       13,233       3,114       3,095  
  

 

 

 

Total revenue

     31,299       56,693       12,641       13,778  

Cost of sales:

        

Product cost of sales

     6,585       11,245       2,456       2,620  

Service cost of sales

     1,596       1,972       340       1,179  
  

 

 

 

Total cost of sales

     8,181       13,217       2,796       3,799  
  

 

 

 

Gross profit

     23,118       43,476       9,845       9,979  

Operating expenses:

        

Research and development(1)

     29,077       38,414       8,743       10,976  

General and administrative(1)

     9,069       12,362       2,642       3,997  

Sales and marketing(1)

     6,131       9,237       1,837       3,234  
  

 

 

 

Total operating expenses

     44,277       60,013       13,222       18,207  
  

 

 

 

Loss from operations

     (21,159     (16,537     (3,377     (8,228

Other income (expense):

        

Interest expense

     (2,204     (1,425     (354     (357

Interest income

     872       909       232       151  

Other income (expense), net

     (777     (1,180     (687     25  
  

 

 

 

Loss before income taxes

     (23,268     (18,233     (4,186     (8,409

Provision for income taxes

     69       69       19       16  
  

 

 

 

Net loss and net comprehensive loss

   $ (23,337   $ (18,302   $ (4,205     (8,425

 

  

 

 

 

 

72


Table of Contents
     
     Year ended December 31,     Three months ended March 31,  
(in thousands, except share and per share data)    2018     2019     2019     2020  
                 (unaudited)  

Net loss attributable to common stockholders per share, basic and diluted(2)

   $ (10.19   $ (7.46   $ (1.84   $ (3.02
  

 

 

 

Weighted-average shares used in calculating net loss per share, basic and diluted(2)

     2,605,124       2,883,950       2,717,542       3,047,967  
  

 

 

 

Pro forma net loss attributable to common stockholders per share, basic and diluted (unaudited)(2)

     $ (0.34     $ (0.16
    

 

 

     

 

 

 

Weighted-average shares used in computing pro forma net loss per share, basic and diluted (unaudited)(2)

       53,346,222         53,510,239  
    

 

 

     

 

 

 

Other financial and operating data (unaudited):

        

Adjusted EBITDA(3)

   $ (14,976   $ (7,935   $ (1,405   $ (5,730

 

 

 

(1)   Includes stock-based compensation as follows:

 

     
     Year ended
December 31,
     Three months
ended March 31,
 
(in thousands)    2018      2019      2019     

2020

 
                   (unaudited)  

Cost of sales

   $      $      $      $ 6  

Research and development

     1,040        1,672        398        511  

General and administrative

     678        1,763        324        529  

Sales and marketing

     268        325        92        133  
  

 

 

 

Total stock-based compensation expense

   $ 1,986      $ 3,760      $ 814      $ 1,179  

 

 

 

(2)   See Note 2 and Note 15 to our consolidated financial statements included elsewhere in this prospectus for further details on the calculation of net loss per share attributable to common stockholders, basic and diluted, the weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted, and unaudited pro forma information.

 

(3)   Adjusted EBITDA is a non-GAAP financial measure that we define as net loss adjusted for interest expense, interest income, other income (expense), net, provision for income taxes, depreciation and stock-based compensation expenses.

 

     Management uses Adjusted EBITDA to evaluate the financial performance of our business and the effectiveness of our business strategies. We present Adjusted EBITDA because we believe it is frequently used by analysts, investors and other interested parties to evaluate companies in our industry and it facilitates comparisons on a consistent basis across reporting periods. Further, we believe it is helpful in highlighting trends in our operating results because it excludes items that are not indicative of our core operating performance.

 

     Adjusted EBITDA has limitations as an analytical tool and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. We may in the future incur expenses similar to the adjustments in the presentation of Adjusted EBITDA. In particular, we expect to incur meaningful stock-based compensation expense in the future. Other limitations include that Adjusted EBITDA does not reflect:

 

   

all expenditures or future requirements for capital expenditures or contractual commitments;

 

   

changes in our working capital needs;

 

   

provision for income taxes, which may be a necessary element of our costs and ability to operate;

 

   

the costs of replacing the assets being depreciated, which will often have to be replaced in the future;

 

   

the non-cash component of employee compensation expense; and

 

   

the impact of earnings or charges resulting from matters we consider not to be reflective, on a recurring basis, of our ongoing operations.

 

73


Table of Contents
     In addition, Adjusted EBITDA may not be comparable to similarly titled measures used by other companies in our industry or across different industries.

 

     
     Year ended
December 31,
    Three months ended
March 31,
 
(in thousands)    2018     2019               2019     2020  
                 (unaudited)  

Net loss

   $ (23,337   $ (18,302   $ (4,205   $ (8,425

Provision for income taxes

     69       69       19       16  

Interest expense

     2,204       1,425       354       357  

Interest income

     (872     (909     (232     (151

Other income (expense), net

     777       1,180       687       (25

Depreciation expense

     4,197       4,842       1,158       1,319  

Stock-based compensation expense(a)

     1,986       3,760       814       1,179  
  

 

 

   

 

 

   

 

 

 

Adjusted EBITDA

   $ (14,976   $ (7,935   $ (1,405   $ (5,730

 

 

 

  (a)   Represents stock-based compensation expense related to option awards. See Note 11 to our consolidated financial statements appearing elsewhere in this prospectus for details on our stock-based compensation expense.

 

     
     December 31,     March 31,  
(in thousands)    2018     2019     2020  
                 (unaudited)  

Consolidated balance sheet data:

      

Cash and cash equivalents

   $ 99,617     $ 81,033     $ 70,306  

Working capital(1)

     103,647       80,428       79,611  

Total assets

     133,819       131,009       122,778  

Total liabilities

     36,188       47,226       46,098  

Total convertible preferred stock

     224,769       224,769       224,769  

Accumulated deficit

     (131,998     (150,300     (158,725

Total stockholders’ equity

     97,631       83,783       76,680  

 

 

 

(1)   Working capital is calculated as current assets less current liabilities. See our consolidated financial statements and related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities.

 

74


Table of Contents

Quarterly results of operations

The following table sets forth unaudited quarterly consolidated statements of operations and comprehensive loss data for each of the periods presented. The information for each of these periods has been prepared in accordance with GAAP on the same basis as our audited consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of our results of operations. This data should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this prospectus. These selected quarterly operating results are not necessarily indicative of our operating results for any future period.

 

   
     Three months ended  
(in thousands, except share and per
share data)
   March 31,
2019
    June 30,
2019
    September 30,
2019
    December 31,
2019
   

March 31,

2020

 
     (unaudited)  

Revenue:

          

Product revenue

   $ 9,527     $ 7,795     $ 13,200     $ 12,938     $ 10,683  

Service revenue

     3,114       3,968       2,467       3,684       3,095  
  

 

 

 

Total revenue

     12,641       11,763       15,667       16,622       13,778  

Cost of sales:

          

Product cost of sales

     2,456       1,949       3,387       3,453       2,620  

Service cost of sales

     340       242       610       780       1,179  
  

 

 

 

Total cost of sales

     2,796       2,191       3,997       4,233       3,799  
  

 

 

 

Gross profit

     9,845       9,572       11,670       12,389       9,979  

Operating expenses:

          

Research and development

     8,743       9,642       10,189       9,840       10,976  

General and administrative

     2,642       3,080       3,136       3,504       3,997  

Sales and marketing

     1,837       2,452       2,623       2,325       3,234  
  

 

 

 

Total operating expenses

     13,222       15,174       15,948       15,669       18,207  
  

 

 

 

Loss from operations

     (3,377     (5,602     (4,278     (3,280     (8,228

Other income (expense):

          

Interest expense

     (354     (350     (360     (361     (357

Interest income

     232       270       221       186       151  

Other income (expense), net

     (687     (488     (10     5       25  
  

 

 

 

Loss before income taxes

     (4,186     (6,170     (4,427     (3,450     (8,409

Provision for income taxes

     19       15       21       14       16  
  

 

 

 

Net loss and net comprehensive loss

   $ (4,205   $ (6,185   $ (4,448   $ (3,464   $ (8,425
  

 

 

 

Net loss attributable to common stockholders per share, basic and diluted

   $ (1.84   $ (2.42   $ (1.78   $ (1.42   $ (3.02
  

 

 

 

Weighted-average shares used in calculating net loss per share, basic and diluted

     2,717,542       2,872,183       2,943,162       2,999,167       3,047,967  

 

 

 

75


Table of Contents

Management’s discussion and analysis of financial condition and results of operations

You should read the following discussion and analysis of financial condition and results of operations together with the section titled “Selected consolidated financial data” and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk factors.” Please also see the section titled “Special note regarding forward looking statements.”

Overview

Berkeley Lights is a leading Digital Cell Biology company focused on enabling and accelerating the rapid development and commercialization of biotherapeutics and other cell-based products. The Berkeley Lights Platform captures deep phenotypic, functional and genotypic information for thousands of single cells in parallel and can also deliver the live biology customers desire in the form of the best cells. This is a new way to capture and interpret the qualitative language of biology and translate it into single-cell specific digital information, referred to as Digital Cell Biology. We currently focus on enabling the large and rapidly growing markets of antibody therapeutics, cell therapy and synthetic biology with our platform. Our goal is to establish the Berkeley Lights Platform as the standard throughout the cell-based product value chain by increasing the probability of successful cell-based product development for our customers.

We developed the Berkeley Lights Platform to provide the most advanced environment for rapid functional characterization of single cells at scale. The Berkeley Lights Platform consists of advanced automated systems that analyze live cells using proprietary consumables and application and workflow software to deliver robust single cell data. Our platform first characterizes the performance of cells relevant to the desired cell-based product early in the process and then connects this phenotypic data to the genetic code for each cell. In contrast, current genomic technologies find sequences first and fail to deliver the functional information early in the process. Performing functional validation early means letting poorly performing cells fail early while rapidly advancing the best candidates forward, before incurring significant research and development expense. Our platform repeats this process of fail and advance many times throughout the process, delivering the best cells for what we believe will deliver the best product. We believe our platform rapidly delivers the deepest information, with linked phenotypic and genotypic data, on tens of thousands of live single cells relevant to the customers’ end product specifications. We believe we are the only company exclusively focused on this approach to Digital Cell Biology, and we believe this level of scale and precision is not attainable with other approaches. This allows our customers to find the best cells by:

 

 

Performing rapid functional characterization of tens of thousands of single cells in parallel;

 

 

Precisely controlling the environment around each cell, and maintaining cells in a healthy state for further use;

 

 

Accessing a high degree of cell biodiversity;

 

 

Deep Opto Profiling of the relevant phenotypic characteristics, at single-cell resolution over time and connecting this to the genotypic information for each cell;

 

 

Performing a broad range of workflows, including single-cell assays, on an integrated platform; and

 

 

Digitally aggregating, accessing and analyzing a rich data library for each single cell.

 

76


Table of Contents

Using our platform, customers can perform functional characterization of single cells at scale, effectively, more often and earlier in the product development process. We believe this enables them to find the best cells and best product candidates earlier and faster in their processes to:

 

 

Accelerate their product development cycles;

 

 

Improve process yield and lower costs throughout their value chain;

 

 

Enable a broad range of complex therapeutic modalities in biopharmaceuticals;

 

 

Increase the probability of successfully developing cell-based products;

 

 

Achieve revenue from their cell-based products sooner and potentially extend the product lifetime on the market prior to patent expiration; and

 

 

Increase return on investment for their cell-based products.

Our platform is a fully integrated, end-to-end solution, comprised of proprietary consumables, including our OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software. Customers load onto our system their live cell samples, as well as media and reagents, then the cells are imported onto our OptoSelect chips where integrated workflows are performed to assess specific cell functions and attributes. Our platform captures and delivers rich single-cell data to find the best cells. We believe this brings common biological cell processing into the digital age. Our platform leverages proprietary OptoElectro Positioning (OEP) technology, which enables deterministic positioning of living single cells and other micro-objects using light. OEP is a core technology of our platform and allows for a high level of control over live single cells or other micro-objects throughout the functional characterization process.

Our commercial workflows, each of which are distinct offerings, are made up of four modules we call Import, Culture, Assay and Export. These modules can be adapted, interchanged and deployed with a variety of single-cell assays to address specific applications and a variety of cell types. We believe this versatility facilitates rapid development of new workflow offerings and virtually unlimited workflow commercialization opportunities. We have developed and will continue to develop and commercialize proprietary workflows across large markets by leveraging existing workflows and assays. Over time, our goal is to enable customers to standardize many of their processes on our platform utilizing our workflows. We believe we are the only company commercializing a platform that can do this in a scalable way.

We commercially launched our platform in December of 2016, which included Beacon and the alpha version of our Opto Cell Line Development 1.0 workflow, targeted to the antibody therapeutics market. From the initial launch of our platform through May 31, 2020, we have commercially launched six workflows and, in June of 2019, we launched our desktop Lightning system targeted for assay development and lower throughput workflows.

Revenue increased 81% to $56.7 million in the year ended December 31, 2019 as compared to $31.3 million in 2018, and 9% to $13.8 million in the three months ended March 31, 2020 as compared to $12.6 million in the same period in 2019, primarily due to the adoption of our platform by new customers, increased workflow utilization from existing customers further deploying our advanced automation systems across their value chains along with the associated increased usage of consumables, as well as service and warranty revenue largely from annual contract renewals by existing customers. Total revenue by market was $49.4 million in antibody therapeutics, $2.6 million in cell therapy and $4.7 million in synthetic biology for the year ended December 31, 2019, compared to $30.3 million, $1.0 million and $10,000, respectively, in 2018. Total revenue by market was $11.8 million in antibody therapeutics, $0.4 million in cell therapy and $1.6 million in synthetic biology for the three months ended March 31, 2020, compared to $12.4 million, $0.2 million and $80,000,

 

77


Table of Contents

respectively, in the three months ended March 31, 2019. For the years ended December 31, 2019 and 2018, revenue from North America accounted for approximately 53% and 65% of our revenue, respectively. For the three months ended March 31, 2020 and 2019, revenue from North America accounted for approximately 62% and 67% of our revenue, respectively.

As of December 31, 2019, our customer base was comprised of 45 customers, which include eight of the ten largest biopharmaceutical companies in the world ranked by 2019 revenue who comprised 18% of our revenue in 2019, as well as biotechnology companies, leading contract research organizations, synthetic biology companies and academic institutions. For the year ended December 31, 2019, we added 22 new customers and for the year ended December 31, 2018, we added 16 new customers. For the three months ended March 31, 2020, we added four new customers. While we have seen significant growth in our customer and installed base, we believe we are still in the very early stages of platform adoption, with the majority of our historical revenue derived from early adopters of our technology for research and development purposes.

As of March 31, 2020, we employed a commercial team of 74 employees, including 24 with Ph.D. degrees and many with significant industry experience. Of the 74 commercial employees, 32 were in business development, sales and marketing. As of March 31, 2020, our commercial team included 17 quota carrying sales representatives, as compared to 13 as of December 31, 2019 and 7 as of December 31, 2018. We follow a direct sales model in North America, certain regions in Europe and China, while also selling through third party distributors and dealers in Asia.

We focus a substantial portion of our resources on platform, workflow and assay development, as well as on business development and sales and marketing. Our research and development efforts are geared towards developing new workflows and assay capabilities, as well as new advanced systems and OptoSelect chips and reagent kits, to meet both our customers’ needs and to address new markets. We incurred research and development expenses of $38.4 million and $29.1 million for the years ended December 31, 2019 and 2018, respectively. We incurred research and development expenses of $11.0 million and $8.7 million for the three months ended March 31, 2020 and 2019, respectively. We intend to continue making significant investments in this area for the foreseeable future. We also intend to continue to make investments in building our sales team and marketing our products and services to potential customers. We incurred aggregate general, administrative, and sales and marketing expenses of $21.6 million and $15.2 million for the years ended December 31, 2019 and 2018, respectively. We incurred aggregate general, administrative, and sales and marketing expenses of $7.2 million and $4.5 million for the three months ended March 31, 2020 and 2019, respectively.

We generally outsource all of our production manufacturing. Design work, prototyping and pilot manufacturing are performed in-house before outsourcing to third party contract manufacturers. Our outsourced production strategy is intended to drive cost leverage and scale, and avoid the high capital outlays and fixed costs related to constructing and operating a manufacturing facility. The contract manufacturers of our systems, reagent kits and OptoSelect chip components are located in the United States, Asia and Europe. Certain of our suppliers of components and materials are single source suppliers. We perform final manufacture and assembly steps of our OptoSelect chips in-house.

To date, we have financed our operations primarily from the issuance and sale of convertible preferred stock, borrowings under our long-term debt agreement, as well as cash flows from operations. Since our inception in 2011, we have incurred net losses in each year. Our net losses were $18.3 million and $23.3 million for the years ended December 31, 2019 and 2018, respectively, and $8.4 million and $4.2 million for the three months ended March 31, 2020 and 2019, respectively. As of March 31, 2020, we had an accumulated deficit of $158.7 million and cash and cash equivalents totaling $70.3 million. We expect to continue to incur significant expenses and

 

78


Table of Contents

operating losses for the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

 

 

attract, hire and retain qualified personnel;

 

 

invest in processes and infrastructure to scale our platform;

 

 

support research and development to introduce new products;

 

 

market and sell new and existing products and services;

 

 

protect and defend our intellectual property; and

 

 

acquire businesses or technologies to support the growth of our business.

Access options to Digital Cell Biology enabled by the Berkeley Lights Platform

Our business model is focused on driving the adoption of the Berkeley Lights Platform and maximizing its use across our customers’ value chains. This is achieved by enabling more functional testing of single cells throughout our customers’ value chains and by finding opportunities for customers to perform single-cell functional testing earlier in their product development process to advance better product candidates. We engage with potential customers to identify a significant challenge they are facing and then evaluate which of our workflows and underlying assays can address their problem. Customers can gain access to our platform via direct purchase, subscription, or strategic partnership. In many cases we can address customers’ needs with existing or variants of existing workflows. Alternately, we may form strategic partnerships to develop substantially new workflows with our customers to address their needs. For the years ended December 31, 2018 and 2019, revenue was $21.2 million and $39.1 million from direct purchase (or 68% and 69%, respectively), respectively, none and $89,000 from subscription (or 0% for both periods), and $6.9 million and $9.6 million from strategic partnerships (or 22% and 17%, respectively), respectively. For the three months ended March 31, 2019 and 2020, revenue was $9.0 million and $9.4 million from direct purchase (or 71% and 69%, respectively), none and $55,000 from subscription (or 0% for both periods), and $2.3 million and $1.9 million from strategic partnerships (or 18% and 13%, respectively), respectively.

Direct purchase: Under this option the customer acquires the platform through a one-time purchase. In addition, the customer must acquire an annually renewable workflow license for any applicable workflow the customer plans to deploy. Customers can opt to buy extended warranty and service agreements and purchase the required consumables and reagents as needed.

Subscription: Through our recently launched subscription program, a customer is able to subscribe to a specific workflow and pay a quarterly fee over a fixed period of time which covers the annual workflow license, the advanced automation system, as well as warranty and service. Customers purchase the required consumables and reagents as needed.

Strategic partnership: This option can combine the direct purchase or subscription access option along with milestone payments for joint workflow development programs. Depending on the partnership, it may in the future include shared revenue arrangements in the form of royalties.

Under these access options we have the potential to generate recurring revenue streams in the form of OptoSelect chip and reagent kit sales, service and extended warranty arrangements, annual renewable workflow license fees, subscription fees, as well as the potential for the future sale of biological assets and royalty arrangements. Growth and predictability of recurring revenue is impacted by the mix between these access options, the total number and frequency of workflows deployed and performed, the length and

 

79


Table of Contents

magnitude of fee and subscription arrangements and their related renewal rates, and to a lesser extent, seasonal budget patterns of our customers. It is our goal and expectation that recurring revenue will grow over time, both in absolute dollars and as a percentage of our revenue.

Our sales process can vary considerably depending upon the type of customer and engagement type. Our sales process can be long, with sales cycles spanning several quarters or more, depending upon the magnitude of the transaction. Given the variability of our sales cycle and the impact of system placement mix from the different access options, as well as the number of placements that require an upfront feasibility study, we expect continued fluctuations in our revenue on a period-to-period basis until we achieve broader adoption of our platform and recurring revenue grows to a higher percentage of our revenue. We enter a given period with limited backlog and our revenue relies on a high conversion percentage of orders to be booked and shipped in that period, which also results in somewhat limited revenue visibility from period to period.

Key factors affecting our results of operations and future performance

We believe that our financial performance has been, and in the foreseeable future will continue to be, primarily driven by multiple factors as described below, each of which presents growth opportunities for our business. These factors also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address these challenges is subject to various risks and uncertainties, including those described under the heading “Risk factors.”

New customer adoption of the Berkeley Lights Platform

Our financial performance has largely been driven by, and a key factor to our future success will be, our ability to increase the adoption of our platform. We plan to drive global customer adoption through business development efforts, a direct sales and marketing organization in the United States, parts of Europe, China, and third party distributors and dealers in Asia. We are investing in our direct sales organization and establishing distributors in certain global geographies. As part of this effort, we increased our direct sales force by 37% in the year ended December 31, 2019 compared to the year ended December 31, 2018. As of December 31, 2019 and March 31, 2020, our installed base of advanced automation systems outside of our BioFoundry was 48 and 54, respectively. For the purposes of defining our installed base of advanced automation systems, we do not include Culture Station as it is not a direct driver of recurring revenue.

Adoption of the platform access options we offer

We offer different access options to our platform in order to meet customer budget and business model needs. We believe this helps to drive customer adoption of our platform. Customers can access our platform with a direct platform purchase or subscription. We also form strategic partnerships to jointly develop workflows, through which the customer can gain access to our platform through a combination of direct platform purchase or subscription, milestone payments and, in the future, potentially shared revenue arrangements. Substantially all of our customers to date have chosen to access our platform with a direct platform purchase or to form a strategic partnership with us. We launched the subscription access option in February of 2020 and believe that over time, a growing portion of our new customers will choose subscription. The degree to which customers adopt one access option over the other could create variations in the amount of and timing in which we recognize revenue and derive cash flow from operations. In addition, as adoption of the subscription access option increases, it will make it difficult to compare our future results with our historical results as a consequence of differing accounting treatment.

 

80


Table of Contents

Utilization and value of our workflows

Workflows represent a source of recurring revenue from customers using our platform. We are driving utilization of our workflows by engaging with customers leveraging our customer success organization to help them advance through the platform adoption cycle from early stage validation of the platform into an integrated solution. As our platform advances towards becoming fully integrated within customer processes, customers utilize more workflows. We also develop new workflows for use at multiple points within the discovery, development and production phases of our customers’ value chains. We increase the value of our workflows by building additional assays that can be used with a given workflow and by further integrating the workflows into our customers’ existing processes. We are also expanding the upstream and downstream reach of our workflows. This increases the workflow value to our customers and enables us to share in that value creation, which we believe will increase workflow adoption.

Adoption of our platform across existing customers’ organizations

There is an opportunity to increase broader adoption and utilization of our platform throughout our customers’ organizations by their purchasing of more systems to support multiple locations, to meet redundancy requirements, or driven by a need to increase capacity. Increased usage amongst existing customers can also occur as customers advance through the platform adoption cycle from early stage validation phase into an integrated solution.

Development and monetization of proprietary biological assets

Our ability to participate in the end markets of cell-based products is a function of how many proprietary biological assets are generated during new workflow development in our BioFoundry. Within our Berkeley Lights BioFoundry, we practice and validate workflows. In certain cases, we may use our own biology as part of this validation process. This enables us to commercialize new workflows and may also generate proprietary valuable biological assets we could sell outright or license to customers, such as functionally validated antibodies or new organisms applicable to synthetic biology.

Adoption of the Berkeley Lights Platform into new markets

Our market entry strategy involves identifying markets that have significant constraints, which can be addressed by our platform. This can be specific to certain diseases or pathogens and/or involve new therapeutic modalities and/or cell types. We drive our expansion into new markets by developing workflows for those markets, either by adapting existing workflows or by partnering with leaders in those markets to develop workflows that address their significant unmet needs, and have general value for other customers in that market. These partnerships can result in joint development of specific workflows and assays involving upfront and milestone arrangements. Depending on the agreement, we could also negotiate end product revenue participation through royalties. Furthermore, these partnerships enable us to generate insights about a particular market, which facilitates development of workflows that we may commercialize to the market broadly.

Leverage derived from our BioFoundry research and development infrastructure

We use our Berkeley Lights BioFoundry, which we believe represents the largest single location platform capacity globally, to drive new workflow development and functionally characterize cells. In our BioFoundry, we practice and develop workflows and functional assays that are applicable throughout the value chain of our target markets. Our workflows are made up of modules that can be adapted, interchanged and deployed with a

 

81


Table of Contents

variety of assays. We believe this versatility facilitates rapid development of new workflow offerings and virtually unlimited workflow commercialization opportunities. There can also be significant leverage among workflows and underlying assays used to functionally characterize single cells in these markets, allowing us to leverage the components developed for one market to improve and accelerate workflow development for another market. This allows us to capture workflow synergies which facilitate adoption of our platform across markets. We have and will continue to invest significantly in expanding our assay and workflow libraries. We have grown our workflow library since the introduction of our first workflow in December of 2016, and as of May 31, 2020, we offered six commercial workflows incorporating sixteen assays and eleven cell classes.

Further investment towards adoption of Digital Cell Biology

Driving the adoption of our platform and workflows across existing and new markets will require significant investment. We plan to further invest in research and development to support the expansion of our workflow and assay libraries as well as the addition of platform capabilities including new reagent kits and OptoSelect chips, and new advanced automation systems to address new markets and new workflows. We will continue to hire employees with the necessary scientific and technical backgrounds to enhance our existing products and help us introduce new products to market. We expect to incur additional research and development expenses and higher stock-based compensation expenses as a result. We further plan to invest in sales, marketing and business development activities to drive the commercialization of new products, migration to new markets and further growth within our existing markets. We have invested, and will continue to invest, significantly in our manufacturing capabilities and commercial infrastructure. We expect to incur additional general and administrative expenses and to have higher stock-based compensation expenses as we support our growth and our transition into a publicly traded company. As cost of revenue, operating expenses and capital expenditures fluctuate over time, we may experience short-term, negative impacts to our results of operations and cash flows, but we are undertaking such investments in the belief that they will contribute to long-term growth and sustainability.

Key business metrics

We regularly review the following key business metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We believe that the following metrics are representative of our current business; however, we anticipate these will change or may be substituted for additional or different metrics as our business grows.

 

         
     Year ended
December 31,
     Change      Three months
ended March 31,
     Change  
(dollars in thousands)    2018      2019      %      2019      2020      %  
                          (unaudited)  

Revenue from new and existing customers:

Revenue from new customers

   $ 16,185      $ 29,639        83%      $ 3,538      $ 5,964        69%  

Revenue from existing customers

     15,114        27,054        79%        9,103        7,814        (14%

Revenue streams:

Direct platform sales

   $ 21,233      $ 39,116        84%      $ 8,973      $ 9,448        5%  

Recurring revenue

     3,206        8,021        150%        1,340        2,479        85%  

Milestones and programs

     6,860        9,556        39%        2,328        1,851        (20%

Platform placements and installation base outside of our BioFoundry:

Direct platform sales placements

     12        26        117%        5        6        20%  

Total installed base

     22        48        118%        27        54        100%  

 

 

 

82


Table of Contents

Components of results of operations

Revenue

Our revenue consists of both product and service revenue, which is generated through the following revenue streams: (i) direct platform sales (advanced automation systems, fully-paid workflow license agreements and platform support), (ii) recurring revenue (annual workflow license agreements, workflow subscription agreements, consumables, service and warranty contracts) and (iii) revenue from partnerships related to our joint development agreements, and to a lesser extent feasibility studies, and potential revenue from sales of, or royalties from the out-licensing of proprietary biological assets that we may develop for our customers. Sales of advanced automation systems, recurring revenue from consumables, workflow subscription agreements, and workflow licenses are defined as product revenue, and revenue from joint development agreements and partnerships, service and warranty contracts, feasibility studies and platform support are defined as service revenue in our results of operations. For the years ended December 31, 2014, 2015, 2016, 2017, 2018 and 2019, revenue was $0.2 million, $1.7 million, $6.1 million, $18.7 million, $31.3 million and $56.7 million, respectively.

Direct platform sales: Direct platform sales are comprised of our customers, distributors and dealer network directly purchasing our advanced automation systems. This included, during our early customer engagements, a fully paid workflow license to practice the desired workflow(s) in a specific field of use. In addition, we also offer platform support to the extent customers require further system and workflow optimization following platform implementation. Direct platform sales accounted for $39.1 million, or 69%, of our revenue in the year ended December 31, 2019, an increase of 84% over our revenue of $21.2 million from direct platform sales in the year ended December 31, 2018. Direct platform sales accounted for $9.4 million, or 69%, of our revenue in the three months ended March 31, 2020, an increase of 5% over our revenue of $9.0 million from direct platform sales in the three months ended March 31, 2019.

Recurring revenue: Each platform placement, depending on the chosen access model, drives various streams of recurring revenue. With each workflow, our customers require certain consumables such as our OptoSelect chips and reagent kits to run their workflows. The OptoSelect chips can only be used with our platform and there are no alternative after-market options that can be used as a substitute. Each OptoSelect chip is considered single-use and only used once per workflow. Consumables are sold without the right of return and revenue is recognized upon transfer of control. Finally, we offer our customers extended warranty and service programs for regular system maintenance and system optimization. These services are provided primarily on a fixed fee basis. We recognize revenue from the sale of an extended warranty contract over the respective coverage period. Warranty and service contracts are typically short-term in nature, generally covering a one-year period.

Recurring revenue may also include annually renewable workflow licenses as well as quarterly workflow subscription payments from annual or multi-year subscription agreements. In late 2019, we piloted the subscription option for the antibody discovery and cell line development workflows. We are still in the early commercialization phase of assessing market acceptance of this access model. Recurring revenue accounted for $8.0 million, or 14%, of our revenue in the year ended December 31, 2019, an increase of 150% over recurring revenue of $3.2 million in the year ended December 31, 2018. Recurring revenue accounted for $2.5 million, or 18%, of our revenue in the three months ended March 31, 2020, an increase of 85% over recurring revenue of $1.3 million in the three months ended March 31, 2019.

Revenue from joint development agreements and partnerships: Joint development agreements are arrangements whereby we provide services for the development of new workflows, cell, or organism types, or deliver specific biological assets to meet specific customers’ needs. Such contracts generally include defined milestones associated with these development activities over extended periods of time, some in excess of twenty-four

 

83


Table of Contents

months. There are formal customer acceptance clauses as each milestone is completed, and an approval to proceed with the next milestone is generally required. Some development agreements may also include a prerequisite feasibility study to determine proof of concept before any milestone work is initiated. We recognize revenue over time using an input measure of progress based on costs incurred to date as compared to the total estimated costs (i.e. percentage of completion). We periodically review and update our estimates which may adjust revenue recognized for the period. Milestone revenue can vary over time as different projects start and complete. On occasion, we also perform feasibility studies prior to a direct platform sale in the event customers require further platform validation prior to purchase. Milestone program and related revenue accounted for $9.6 million, or 17%, of our revenue in the year ended December 31, 2019, an increase of 39% over our revenue of $6.9 million from milestone program and related revenue in the year ended December 31, 2018. Milestone program and related revenue accounted for $1.9 million, or 13%, of our revenue in the three months ended March 31 2020, a decrease of 20% from our revenue of $2.3 million from milestone program and related revenue in the three months ended March 31, 2019.

Costs of sales, gross profit and gross margin

Product cost of sales. Cost of sales associated with our products primarily consists of manufacturing related costs incurred in the production process, including personnel and related costs, costs of component materials, labor and overhead, packaging and delivery costs and allocated costs, including facilities and information technology.

Service cost of sales. Cost of sales associated with our services primarily consists of personnel and related costs, expenses related to the development of customized platforms and workflows, feasibility studies on our platforms and service and warranty costs to support our customers. We maintain continuous efforts to increase reliability and uptime of our advanced automation systems. During the year ended December 31, 2019 and the three months ended March 31, 2020, we incurred service and warranty costs of $2.1 million and $0.3 million, respectively, for the support of our installed base.

Gross profit and gross margin. Gross profit is calculated as revenue less cost of revenue. Gross margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including: market conditions that may impact our pricing; sales mix among platform access options; sales mix changes among consumables, advanced automation systems and services; product mix changes between established products and new products; excess and obsolete inventories; our cost structure for manufacturing operations relative to volume; and product warranty obligations. We expect cost of sales to increase in absolute dollars in future periods as our revenue grows, and as we plan to hire additional employees to support our manufacturing, operations, service and support organizations.

Operating expenses

Research and development. Research and development costs primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies, materials expenses and allocated facilities costs for employees and contractors engaged in research and product development. We expense all research and development costs in the period in which they are incurred.

We plan to continue to invest in our research and development efforts, including hiring additional employees, to enhance existing products and develop new products. As a result, we expect that our research and development expenses will continue to increase in absolute dollars in future periods. We expect these expenses to vary from period to period as a percentage of revenue.

General and administrative. Our general and administrative expenses primarily consist of salaries, benefits and stock-based compensation costs for employees in our executive, accounting and finance, legal and human

 

84


Table of Contents

resource functions as well as professional services fees, such as consulting, audit, tax and legal fees, general corporate costs and allocated overhead expenses. We expect that our general and administrative expenses will continue to increase in absolute dollars after this offering, primarily due to increased headcount to support anticipated growth in the business and due to incremental costs associated with operating as a public company. We expect these expenses to vary from period to period as a percentage of revenue.

Sales and marketing. Our sales and marketing expenses consist primarily of salaries, benefits, sales commissions and stock-based compensation costs for employees within our commercial sales functions, as well as marketing, travel expenses and allocated facilities and IT costs. We expect our sales and marketing expenses to increase in absolute dollars as we expand our commercial sales, marketing and business development teams, increase our presence globally and increase marketing activities to drive awareness and adoption of our platform. While these expenses may vary from period to period as a percentage of revenue, we expect these expenses to increase as a percent of sales in the short-term as we continue to grow our commercial organization to support anticipated growth in the business.

We expect our aggregate stock-based compensation to continue to increase in absolute dollar terms.

Other income (expense)

Interest expense. Interest expense consists primarily of interest related to borrowings under our debt obligations.

Interest income. Interest income primarily consists of interest earned on our cash and cash equivalents which are invested in cash deposits and in money market funds.

Other income (expense), net. Other income (expense), net consists primarily of losses from our equity method investment and foreign currency exchange gains and losses. Foreign currency exchange gains and losses relate to transactions and asset and liability balances denominated in currencies other than the U.S. dollar, primarily related to our operations in the United Kingdom. We expect our foreign currency gains and losses to continue to fluctuate in the future due to changes in foreign currency exchange rates.

Provision for income taxes

Our provision for income taxes consists primarily of foreign taxes and state minimum taxes in the United States. As we expand the scale and scope of our international business activities, any changes in the United States and foreign taxation of such activities may increase our overall provision for income taxes in the future.

 

85


Table of Contents

Results of operations

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in the prospectus. The following tables set forth our results of operations for the periods presented:

 

     
     Year ended
December 31,
    Three months ended
March 31,
 
(in thousands)    2018     2019     2019     2020  
                 (unaudited)  

Revenue:

        

Product revenue

   $ 22,882     $ 43,460     $ 9,527     $ 10,683  

Service revenue

     8,417       13,233       3,114       3,095  
  

 

 

 

Total revenue

     31,299       56,693       12,641       13,778  

Costs of sales:

        

Product costs of sales

     6,585       11,245       2,456       2,620  

Service costs of sales

     1,596       1,972       340       1,179  
  

 

 

 

Total costs of sales

     8,181       13,217       2,796       3,799  
  

 

 

 

Gross profit

     23,118       43,476       9,845       9,979  

Operating expenses:

        

Research and development(1)

     29,077       38,414       8,743       10,976  

General and administrative(1)

     9,069       12,362       2,642       3,997  

Sales and marketing(1)

     6,131       9,237       1,837       3,234  
  

 

 

 

Total operating expenses

     44,277       60,013       13,222       18,207  
  

 

 

 

Loss from operations

     (21,159     (16,537     (3,377     (8,228

Other income (expense):

      

Interest expense

     (2,204     (1,425     (354     (357

Interest income

     872       909       232       151  

Other income (expense), net

     (777     (1,180     (687     25  
  

 

 

 

Loss before provision for income taxes

     (23,268     (18,233     (4,186     (8,409

Provision for income taxes

     69       69       19       16  
  

 

 

 

Net loss and net comprehensive loss

   $ (23,337   $ (18,302   $ (4,205   $ (8,425

 

 

 

(1)   Amounts include stock-based compensation as follows:

 

     
     Year ended
December 31,
     Three months ended
March 31,
 
(in thousands)    2018      2019                2019      2020  
                   (unaudited)  

Cost of sales

   $      $      $      $ 6  

Research and development

     1,040        1,672        398        511  

General and administrative

     678        1,763        324        529  

Sales and marketing

     268        325        92        133  
  

 

 

 

Total stock-based compensation expense

   $ 1,986      $ 3,760      $ 814      $ 1,179  

 

 

 

86


Table of Contents

Comparison of the three months ended March 31, 2019 and 2020

Revenue

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019      2020      Amount     %  
     (unaudited)  

Product revenue

   $ 9,527      $ 10,683      $ 1,156       12%  

Service revenue

     3,114        3,095        (19     (1%
  

 

 

   

Total revenue

   $ 12,641      $ 13,778      $ 1,137       9%  

 

 

Product revenue increased by $1.2 million, or 12%, for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. The increase was primarily driven by an increase of $0.8 million in consumable sales driven by the increase in our installed base and an increase of $0.4 million in direct platform sales resulting from six new system placements in the three months ended March 31, 2020, compared to five new system placements in the three months ended March 31, 2019. The increase in revenue from increased system placements in the three months ended March 31, 2020 was partially offset by the mix of system type placed.

Service revenue remained flat at $3.1 million for the three months ended March 31, 2020, compared to the three months ended March 31, 2019 and was primarily driven by an increase from sales of service warranty and milestones and programs, offset by decreases in revenue from feasibility studies and platform support arrangements.

We added four new customers in the three months ended March 31, 2020, and three new customers in the three months ended March 31, 2019. Total revenue for the three months ended March 31, 2020 was comprised of $6.0 million in revenue from those new customers and $7.8 million from existing customers compared to $3.5 million and $9.1 million, respectively, in the three months ended March 31, 2019.

Cost of sales, gross profit and gross margin

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019      2020      Amount      %  
     (unaudited)  

Product cost of sales

   $ 2,456      $ 2,620      $ 164        7%  

Service cost of sales

     340        1,179        839        247%  
  

 

 

    

Total cost of sales

   $ 2,796      $ 3,799      $ 1,003        36%  

Gross profit

   $ 9,845      $ 9,979      $ 134        1%  

Gross margin

     78%        72%        

 

 

Product cost of sales increased by $0.2 million, or 7%, for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. The increase in product costs of sales was in line with revenue growth for consumables and platforms. Service cost of sales increased by $0.8 million, or 247%, for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. The increase was primarily due to costs incurred related to milestones and programs under which we provide services on a time and materials basis.

 

87


Table of Contents

Gross profit increased by $0.1 million, or 1%, and gross margin declined by 6 percentage points for the three months ended March 31, 2020 as compared to the three months ended March 31, 2019, primarily due to product mix and the timing of revenue recognition with respect to sales of our platform equipment.

Operating expenses

Research and development

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019      2020      Amount      %  
     (unaudited)  

Research and development

   $ 8,743      $ 10,976      $ 2,233        26%  

 

 

Research and development expense increased by $2.2 million, or 26%, for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. The increase was due to a $1.4 million increase in personnel-related expenses, including a $0.1 million increase in stock-based compensation expense, resulting from increased headcount and a $0.8 million increase in testing and qualification materials and other costs related to various projects to develop and improve systems, workflows and assays.

General and administrative

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019      2020      Amount      %  
     (unaudited)  

General and administrative

   $ 2,642      $ 3,997      $ 1,355        51%  

 

 

General and administrative expense increased by $1.4 million, or 51%, for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. The increase was due to a $0.8 million increase in personnel-related expenses, including a $0.2 million increase in stock-based compensation due to growth in our overall operations, and a $0.6 million increase in professional fees and other expenses related to outside legal, accounting, consulting and IT services to support our continued growth.

Sales and marketing

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019      2020      Amount      %  
     (unaudited)  

Sales and marketing

   $ 1,837      $ 3,234      $ 1,397        76%  

 

 

Sales and marketing expense increased by $1.4 million, or 76%, for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. The increase was due to a $0.6 million increase in personnel-related expenses, including a $41,000 increase in stock-based compensation as a result of higher headcount, a $0.4 million increase in marketing and advertising costs as we expand our market presence and launch new products, and a $0.4 million increase in other costs.

 

88


Table of Contents

Interest expense

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019      2020      Amount      %  
     (unaudited)  

Interest expense

   $ 354      $ 357      $ 3        1%  

 

 

Interest expense remained flat at $0.4 million for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. Interest expense resulted primarily from interest incurred on our loan from East West Bank, which carries a fixed rate of interest.

Interest income

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019      2020      Amount     %  
     (unaudited)  

Interest income

   $ 232      $ 151      $ (81     (35%

 

 

Interest income decreased by $0.1 million for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. The decrease was primarily due to lower average cash balances and lower interest received on our cash and short-term deposits due to the continuing decline in interest rates.

Other income (expense), net

 

   
     Three months ended  
     March 31,      Change  
(in thousands, except percentages)    2019     2020      Amount      %  
     (unaudited)  

Other income (expense), net

   $ (687   $ 25      $ 712        104%  

 

 

Other income (expense), net increased by $0.7 million for the three months ended March 31, 2020, compared to the three months ended March 31, 2019. Other expense for the three months ended March 31, 2019 included losses associated with our equity method investment, which ceased operations during fiscal 2019.

Comparison of the years ended December 31, 2018 and 2019

Revenue

 

     
     Year ended
December 31,
     Change  
(in thousands, except percentages)    2018      2019      Amount      %  

Product revenue

   $ 22,882      $ 43,460      $ 20,578        90%  

Service revenue

     8,417        13,233        4,816        57%  
  

 

 

    

Total revenue

   $ 31,299      $ 56,693      $ 25,394        81%  

 

 

Product revenue increased by $20.6 million, or 90%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The increase was primarily driven by an $18.5 million increase in direct platform sales resulting from 26 new system placements during the year ended December 31, 2019, compared to 12 new

 

89


Table of Contents

system placements for the year ended December 31, 2018. Additionally, recurring revenue increased by $2.1 million as a result of an increase in consumable sales for the year ended December 31, 2019, as compared to the year ended December 31, 2018, resulting from the increase in our system placements and installed base. For the year ended December 31, 2019, we maintained an installed base of 48 systems globally outside of our BioFoundry, compared to 22 systems for the year ended December 31, 2018.

Service revenue increased by $4.8 million, or 57%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The growth was primarily due to a $3.8 million increase relating to our existing milestone arrangements supporting the development of customized workflows and platforms, and a $2.5 million increase from sales of service and warranty during the year ended December 31, 2019, driven by the increase in our installed base and customers renewing their service and warranty contracts, offset by decreases in feasibility studies and platform support arrangements of $1.5 million resulting from fewer customers requiring these arrangements during 2019 as compared to 2018.

We added 22 new customers for the year ended December 31, 2019, and 16 new customers were added for the year ended December 31, 2018. Total revenue for the year ended December 31, 2019 was comprised of $29.6 million in revenue from those new customers versus $27.1 million from existing customers compared to $16.2 million and $15.1 million, respectively, during the year ended December 31, 2018.

Costs of sales, gross profit and gross margin

 

     
     Year ended
December 31,
     Change  
(in thousands, except percentages)    2018      2019      Amount      %  

Product cost of sales

   $ 6,585      $ 11,245      $ 4,660        71%  

Service cost of sales

     1,596        1,972        376        24%  
  

 

 

    

Total cost of sales

   $ 8,181      $ 13,217      $ 5,036        62%  

Gross profit

   $ 23,118      $ 43,476      $ 20,358        88%  

Gross margin

     74%        77%        

 

 

Product cost of sales increased by $4.7 million, or 71%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The increase in product costs of sales was in line with revenue growth for both systems and consumables and included an increase in warranty repair costs driven by the increase in our installed base. Service cost of sales increased by $0.4 million, or 24%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The increase was primarily due to a $0.7 million increase in cost for extended warranty services as the installed base matured and customers renewed their service contracts, and more customers purchased extended warranty as the standard warranty expired, as well as a $0.5 million increase in direct costs of services related to the development of customized workflows and platforms, offset by a decrease of $0.8 million in direct costs for feasibility studies and platform support resulting from fewer customers requiring such arrangements in 2019 compared to 2018.

Gross profit increased by $20.4 million, or 88%, and gross margin improved by 3 percentage points for the year ended December 31, 2019 as compared to the year ended December 31, 2018, primarily due to increased revenue as well as a higher mix of milestone revenue driven by percentage of completion. Gross margin for the year ended December 31, 2017 was 77%.

 

90


Table of Contents

Operating expenses

Research and development

 

     
     Year ended
December 31,
     Change  
(in thousands, except percentages)    2018      2019      Amount      %  

Research and development

   $ 29,077      $ 38,414      $ 9,337        32%  

 

 

Research and development expense increased by $9.3 million, or 32%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The increase was due to a $4.6 million increase in testing and qualification materials, depreciation and other costs, and a $4.7 million increase in personnel-related expenses, including a $0.6 million increase in stock-based compensation expense, resulting from increased headcount devoted to working on various projects to develop and improve systems, workflows and assays.

General and administrative

 

     
     Year ended
December 31,
     Change  
(in thousands, except percentages)    2018      2019      Amount      %  

General and administrative

   $ 9,069      $ 12,362      $ 3,293        36%  

 

 

General and administrative expense increased by $3.3 million, or 36%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The increase was due to a $2.2 million increase in personnel-related expenses, including a $1.1 million increase in stock-based compensation, due to growth in our overall operations, and a $1.1 million increase in professional fees and other expenses related to outside legal, accounting, consulting and IT services.

Sales and marketing

 

     
     Year Ended
December 31,
     Change  
(in thousands, except percentages)    2018      2019      Amount      %  

Sales and marketing

   $ 6,131      $ 9,237      $ 3,106        51%  

 

 

Sales and marketing expense increased by $3.1 million, or 51%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The increase was due to a $1.9 million increase in personnel-related expenses, including a $0.1 million increase in stock-based compensation, as a result of higher headcount to support our revenue growth, a $0.5 million increase in marketing and advertising costs, and a $0.7 million increase in other costs.

Interest expense

 

     
     Year ended
December 31,
     Change  
(in thousands, except percentages)    2018      2019      Amount     %  

Interest expense

   $ 2,204      $ 1,425      $ (779     (35%

 

 

Interest expense decreased by $0.8 million, or 35%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The decrease was primarily due to the repayment of our debt with TriplePoint in May 2018, which was partially offset by interest incurred on our loan from East West Bank entered into in May 2018, which served to refinance the TriplePoint loan at a lower interest rate.

 

91


Table of Contents

Interest income

 

     
     Year ended
December 31,
     Change  
(in thousands, except percentages)    2018      2019      Amount     %  

Interest income

   $ 872      $ 909      $ (37     (4%

 

 

Interest income remained relatively flat for the year ended December 31, 2019, compared to the year ended December 31, 2018. The slight increase was primarily due to increased average cash balances year over year.

Other income (expense), net

 

     
     Year ended
December 31,
    Change  
(in thousands, except percentages)    2018     2019     Amount     %  

Other expense, net

   $ (777   $ (1,180   $ (403     (52%

 

 

Other expense, net increased by $0.4 million for the year ended December 31, 2019, compared to the year ended December 31, 2018. This increase is the result of increases in losses associated with our equity method investment, as well as certain one-time costs incurred upon the cessation of our joint venture in Optera Therapeutics Corp. in 2019.

Liquidity and capital resources

Since our inception, we have experienced losses and negative cash flows from operations, and as of March 31, 2020, we had a consolidated net loss of $8.4 million and an accumulated deficit of $158.7 million. We have primarily relied on equity and debt financings to fund our operations to date, including most recently raising gross proceeds of $95.0 million through the sale and issuance of Series E convertible preferred stock in 2018. As of March 31, 2020, we had cash and cash equivalents of $70.3 million.

We expect to incur additional operating losses in the foreseeable future as we continue to invest in the research and development of our product offerings, commercialize and launch platforms, and expand into new markets. Based on our current business plan, we believe the net proceeds from this offering, together with our existing cash and cash equivalents and anticipated cash flows from operations will be sufficient to meet our working capital and capital expenditure needs over at least the next 12 months following the date of this prospectus.

Our future capital requirements will depend on many factors, including, but not limited to our ability to successfully commercialize and launch products, and to achieve a level of sales adequate to support our cost structure. If we are unable to execute on our business plan and adequately fund operations, or if the business plan requires a level of spending in excess of cash resources, we will have to seek additional equity or debt financing. If additional financings are required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, results of operations and prospects could be adversely affected.

Sources of liquidity

Since our inception, we have financed our operations primarily from the issuance and sale of our convertible preferred stock, borrowings under long-term debt agreements, and to a lesser extent, cash flow from operations.

 

92


Table of Contents

Convertible preferred stock financings

Through March 31, 2020, we have raised a total of $224.8 million from the issuance and sale of convertible preferred stock, net of costs associated with such financings. Most recently, in 2018 we issued shares of Series E convertible preferred stock for gross proceeds of $95.0 million.

East West Bank Loan and Security Agreement

In May of 2018, we entered into a Loan and Security Agreement with East West Bank, or EWB, which was subsequently amended in April of 2019 and March of 2020, providing us with the ability to borrow up to $20.0 million. The full amount of the loan was funded in May of 2018, and $20.0 million of term loan borrowings were outstanding as of December 31, 2019. Borrowings under the term loan mature on May 23, 2022 and accrue interest at a fixed rate of 6.73% per annum. We are required to make interest only payments on the term loan through May of 2021, after which equal monthly installments of principal and interest are due.

The EWB Loan Agreement is collateralized by substantially all of our property, except for intellectual property, which is subject to a negative pledge. The EWB Loan Agreement contains customary negative covenants that limit our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets and merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity. The EWB Loan Agreement also contains customary affirmative covenants, including requirements to, among other things, deliver audited financial statements. In addition, the EWB Loan Agreement contains financial covenants that require us to maintain a certain percentage of our total cash holdings in accounts with EWB as well as maintain certain ratios of cash to cash burn. If we default under the EWB Loan Agreement and if the default is not cured or waived, the lender could cause any amounts outstanding to be payable immediately. Under certain circumstances, the lender could also exercise its rights with respect to the collateral securing such loans. Moreover, any such default would limit our ability to obtain additional financing, which may have an adverse effect on our cash flow and liquidity.

We were in compliance with all covenants under the EWB Loan Agreement as of March 31, 2020.

Cash flows

The following table summarizes our cash flows for the periods presented:

 

     
     Year ended
December 31,
    Three months
ended March 31,
 
(in thousands)    2018     2019     2019     2020  
                 (unaudited)  

Net cash (used in) provided by:

        

Operating activities

   $ (13,535   $ (10,533   $ (1,892   $ (9,988

Investing activities

     (8,418     (9,073     (2,200     (760

Financing activities

     95,557       1,022       217       21  
  

 

 

 

Net increase (decrease) in cash, cash equivalents, and restricted cash

   $ 73,604     $ (18,584   $ (3,875   $ (10,727

 

   

 

 

   

 

 

 

Operating activities

Net cash used in operating activities increased by $8.1 million to $10.0 million in the three months ended March 31, 2020 compared to $1.9 million in the three months ended March 31, 2019. The increase resulted

 

93


Table of Contents

primarily from higher net losses during the three months ended March 31, 2020 and increased working capital requirements primarily related to an increase in inventory and prepaid and other current assets as a result of the continued growth of our business, offset by a reduction in deferred revenue due to the timing of recognition of revenue.

Net cash used in operating activities decreased by $3.0 million to $10.5 million in the year ended December 31, 2019 compared to $13.5 million in the year ended December 31, 2018. This decrease reflects lower net losses during the period, partially offset by increased working capital requirements primarily due to an increase in our inventory and prepaid and other current assets as a result of the continued growth of our business, in addition to a reduction in our operating lease liabilities associated with payments on our facility leases. In addition, net cash used in operating activities reflects an increase in non-cash charges of $4.2 million primarily driven by higher depreciation and stock-based compensation expenses as well as the amortization of the operating lease right-of-use asset associated with our facility leases.

Investing activities

Net cash used in investing activities was $0.8 million in the three months ended March 31, 2020 compared to $2.2 million in the three months ended March 31, 2019. The decrease was primarily driven by the timing of capital expenditures.

Net cash used in investing activities was $9.1 million in the year ended December 31, 2019 compared to $8.4 million during the year ended December 31, 2018. The increase was primarily driven by higher capital expenditures.

Financing activities

Net cash provided by financing activities was $21,000 for the three months ended March 31, 2020 compared with $0.2 million for the three months ended March 31, 2019. Net cash provided by financing activities related primarily to cash receipts from the issuance of common stock upon the exercise of stock options.

Net cash provided by financing activities was $1.0 million for the year ended December 31, 2019 compared with $95.6 million for the year ended December 31, 2018. Net cash provided by financing activities during the year ended December 31, 2019 resulted from cash receipts of $1.0 million from the issuance of common stock upon exercise of stock options. Net cash provided by financing activities for the year ended December 31, 2018 resulted primarily from net cash receipts of $94.8 million from the issuance of Series E convertible preferred stock net of issuance costs, $0.6 million of net proceeds from the refinancing of our loan with TriplePoint and $0.2 million cash receipts from the issuance of common stock upon exercise of stock options.

Concentration of credit risk

For the three months ended March 31, 2019, five customers accounted for 32%, 15%, 14%, 13% and 13% of revenue, and for the three months ended March 31, 2020, six customers accounted for 17%, 14%, 13%, 13%, 12% and 12% of revenue. Four customers accounted for 25%, 18%, 18% and 16% of accounts receivable as of March 31, 2020.

For the year ended December 31, 2019, no customers accounted for more than 10% of revenue. For the year ended December 31, 2018, one customer accounted for 12% of revenue. At December 31, 2019, four customers comprised 20%, 19%, 18% and 12% of accounts receivable. At December 31, 2018, five customers accounted for 19%, 17%, 17%, 16% and 13% of accounts receivable.

 

94


Table of Contents

Contractual obligations and commitments

The following table summarizes our contractual obligations and commitments as of December 31, 2019:

 

   
     Payments due by period  
(in thousands)    Total      Less than
1 year
    

1 to 3

Years

    

3 to 5

Years

    

More than

5 years

 

Lease commitments(1), (2)

   $ 9,909      $ 2,529      $ 4,978      $ 2,402      $  

Debt obligations, including interest(3)

     21,989        7,098        14,891                

Purchase obligations(4)

     10,615        9,762        853                
  

 

 

 

Total

   $ 42,513      $ 19,389      $ 20,722      $ 2,402      $  

 

 

 

(1)   We lease our office and laboratory space in Emeryville, California under multiple operating leases that expire in March 2028. We also lease multiple office facilities in Shanghai, China under operating leases that expire at various dates, the latest of which is February 2022.

 

(2)   On June 25, 2020, we entered into an operating lease for 34,789 square feet of additional space in Emeryville, California, as well as amended our existing lease arrangements to vacate certain existing space and extend the terms of our remaining existing space in Emeryville. The lease for additional space commences October 1, 2020 and all of the leases now expire on March 31, 2028. The total incremental non-cancelable lease payments under the new and amended lease agreements are $20.1 million through the remainder of the updated lease terms.

 

(3)   As of December 31, 2019, the outstanding principal balance of our term loan under the EWB Loan Agreement was $20.0 million. Borrowings under the term loan mature on May 23, 2022 and accrue interest at a fixed rate of 6.73% per annum. Upon amendment of the EWB Loan Agreement on March 17, 2020, interest only monthly payments are due on the term loan through May 2021, after which equal monthly installments of principal and interest are due.

 

(4)   Purchase obligations relate primarily to our contract manufacturer which manufactures our instruments and makes advance purchases of components based on our sales forecasts and the placement of purchase orders by us, as well as to commitments made to certain providers of components for our consumable manufacturing. To the extent components are purchased by the contract manufacturer on our behalf and cannot be used by the contract manufacturer’s other customers, we are obligated to purchase such components.

Off-balance sheet arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet financing arrangements or any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities, that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Qualitative and quantitative disclosures about market risk

Interest rate risk

Customer financing exposure. We are indirectly exposed to interest rate risk because many of our customers depend on debt financings to purchase our platforms and systems. An increase in interest rates could make it challenging for our customers to obtain the capital necessary to make such purchases on favorable terms, or at all. Such factors could reduce demand or lower the price we can charge for our platforms and systems, thereby reducing our net sales and gross profit.

Fixed rate debt. In May 2018, we entered into a Loan and Security Agreement with East West Bank, which is due in May 2022, and carries a fixed interest rate of 6.73% per annum. If we refinance our loan agreement or enter into new debt arrangements, interest rates could increase and thereby increase our financing costs and increase our net loss. A hypothetical 100 basis point change in interest rates would have resulted in a $0.2 million increase in interest expense for the year ended December 31, 2019.

Bank deposit, money market and note receivable exposure. As of December 31, 2019, we had cash and cash equivalents, including restricted cash, of $81.3 million, which consisted primarily of money market funds and bank deposits. The primary objective of our investment is to preserve principal and provide liquidity. These money market funds, and bank deposits generate interest income at variable rates below 1%. A hypothetical

 

95


Table of Contents

100 basis point decrease in interest rates would have lowered our interest income by $0.9 million and increased our net loss by this amount.

Foreign currency risk

The majority of our revenue has been generated in the United States. Through December 31, 2019, we did not generate any revenue denominated in foreign currencies. As we expand our presence in international markets, to the extent we are required to enter into agreements denominated in a currency other than the US dollar, our results of operations and cash flows may increasingly be subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign exchange rates. To date, we have not entered into any hedging arrangements with respect to foreign currency risk. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in currency rates.

Critical accounting policies and estimates

We have prepared our consolidated financial statements in accordance with GAAP. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, expenses and related disclosures. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

While our significant accounting policies are described in more detail in Note 2 to our audited consolidated financial statements, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated financial statements.

Revenue recognition

We early adopted Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606), or ASC 606, on January 1, 2018 using the full retrospective method.

We derive revenue from two primary sources, product revenue, which is comprised primarily of direct platform sales revenue, consumables revenue and service revenue, which is comprised of revenue from joint development agreements, service and warranty, platform support and feasibility studies on our platform. Revenue is recognized net of applicable taxes imposed on the related transaction.

We recognize revenue when we satisfy the performance obligations under the terms of a contract and control of our products and services is transferred to our customers in an amount that reflects the consideration we expect to receive from our customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract based on standalone selling price, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. We consider a performance obligation satisfied once we have transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service.

 

96


Table of Contents

Our agreements with customers often include multiple performance obligations, which can sometimes be included in separate contracts entered into within a reasonably short period of time. We consider an entire customer arrangement to determine if separate contracts should be considered combined for the purposes of revenue recognition.

In order to determine the stand-alone selling price, we conduct a periodic analysis to determine whether various goods or services have an observable stand-alone selling price as well as to identify significant changes to current stand-alone selling prices. If we do not have an observable stand-alone selling price for a particular good or service, then the stand-alone selling price for that particular good or service is estimated using an approach that maximizes the use of observable inputs. Our process for determining stand-alone selling price requires judgment and considers multiple factors that are reasonably available and maximizes the use of observable inputs that may vary over time depending upon the unique facts and circumstances related to each performance obligation. We believe that this method results in an estimate that represents the price we would charge for the product offerings if they were sold separately.

For most of our performance obligations, we have established stand-alone selling price as a range rather than a single value, such range being plus or minus 15% of the median of observables prices. If the contractually stated prices of all the performance obligations in a contract fall within their respective stand-alone selling price ranges, we will allocate the transaction price at the contractually stated amounts. In situations where the contractually stated price for one or more performance obligations in a contract fall(s) outside of their respective stand-alone selling price range, we will use the mid-point of the respective stand-alone selling price range for performance obligations in the contract priced outside of their respective stand-alone selling price range(s) and contract values for performance obligations priced within their respective stand-alone selling price range(s), to allocate the transaction price on a relative stand-alone selling price basis.

Taxes, such as sales, value-add and other taxes, collected from customers concurrent with revenue generating activities and remitted to governmental authorities are not included in revenue. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in cost of sales.

The following describes the nature of our primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the types of transactions we enter into with our customers.

Product revenue

Product revenue is comprised of two major revenue streams, direct platform sales and consumables. Direct platform sales revenue is comprised of advanced automation systems (including workflow licenses), as well as Culture Stations. Consumables revenue is comprised of OptoSelect chips required to run the system as well as reagent kits. Our standard arrangement with our customers is generally a purchase order or an executed contract. Revenue is recognized upon transfer of control of the products to the customer, which generally occurs at a point in time upon the completion of installation and training for advanced automation systems or when the product is shipped or delivered for consumables and Culture Stations. Payment terms are generally thirty to ninety days from the date of invoicing.

On a limited basis, we also enter into fixed-term sales-type lease arrangements with certain qualified customers. Revenue from sales-type lease arrangements is generally recognized in a manner consistent with platform equipment, assuming all other revenue recognition criteria have been met.

Service revenue

Service revenue primarily consists of joint development agreements, service and warranty, platform support and feasibility studies on our advanced automation systems and workflows. Our services are provided primarily

 

97


Table of Contents

on a fixed fee basis; from time to time these fixed fee contracts may be invoiced at the outset of the arrangements. We recognize revenue from the sale of an extended warranty, enhanced service warranty arrangements and feasibility studies over the respective period, while revenue on platform support is recognized as the services are performed. Service contracts are typically short-term in nature. Payment terms are generally thirty to ninety days from the date of invoicing.

Joint development agreements are agreements whereby we provide services for the development of customized advanced automation systems and workflows to meet a specific customer’s needs. Such contracts generally include defined milestones associated with these development activities over extended periods of time, some in excess of twenty-four months. There are formal customer acceptance clauses as each milestone is completed, and an approval to proceed with the next milestone is generally required. We recognize revenue over time, using an input measure of progress based on costs incurred to date relative to total expected costs. Payment terms are generally thirty to ninety days from the achievement of each milestone. We place a constraint on a variable consideration estimate that focuses on possible future downward revenue adjustments (i.e. revenue reversals) if there is uncertainty that could prevent a faithful depiction of the consideration that we expect to be entitled to. The constraint estimate is reassessed at each reporting date until the uncertainty is resolved.

Contract assets and contract liabilities

Contract assets include amounts where revenue recognized exceeds the amount invoiced to the customer and the right to payment is not solely subject to the passage of time. Contract liabilities consist of fees invoiced or paid by our customers for which the associated services have not been performed and revenue has not been recognized based on our revenue recognition criteria described above. Such amounts are reported as deferred revenue on our consolidated balance sheets. Deferred revenue that is expected to be recognized during the following twelve months is recorded as a current liability and the remaining portion is recorded as non-current.

Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or non-current on our consolidated balance sheet based on the timing of when we expect to complete the related performance obligations and invoice the customers. Contract liabilities are classified as current or non-current on our consolidated balance sheet based on the timing when the revenue recognition associated to the related customer payments and invoicing is expected to occur.

Costs to obtain or fulfill a contract

Origination costs relate primarily to the payment of incentive bonuses that are directly related to sales transactions. Fulfillment costs generally include the direct cost of services such as platform support and feasibility studies.

Origination and fulfillment costs that are internal to us are generally expensed when incurred because most costs are incurred concurrently with the delivery of the related goods and services, which are predominantly recognized at a point in time or short-term in nature. The origination costs that are related to long-term development agreements are capitalized and amortized over the relevant service period.

Stock-based compensation

We maintain an incentive compensation plan under which incentive stock options and nonqualified stock options are granted primarily to employees and non-employee consultants.

 

98


Table of Contents

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service period. The fair value of stock-based awards to employees is estimated using the Black-Scholes option pricing model. We record forfeitures as they occur.

Stock-based compensation expense for non-employee stock options is measured at the grant date based on fair market value using the Black-Scholes option pricing model and is recorded as the options vest. Prior to January 1, 2019, nonemployee stock options subject to vesting were revalued periodically over the requisite service period, which was generally the same as the vesting term of the award. From January 1, 2019, the grant date fair market value of non-employee stock options is recognized in the consolidated statements of operations on a straight-line basis over the requisite service period and forfeitures are recognized as they occur.

Common stock valuations

There has been no public market for our common stock to date. As such, the estimated fair value of our common stock has been determined at each grant date by our board of directors, with input from management, based on the information known to us on the grant date and upon a review of any recent events and their potential impact on the estimated per share fair value of our common stock. As part of these fair value determinations, our board of directors obtained and considered valuation reports prepared by a third party valuation firm in accordance with the guidance outlined in the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held-Company Equity Securities Issued as Compensation.

Beginning March 31, 2018, in contemplation of an initial public offering, we estimated the enterprise value of our business using a hybrid approach in determining the fair value of our common stock that includes a probability-weighted expected return method, or PWERM, and an option pricing method, or OPM. Under a PWERM, the fair market value of the common stock is estimated based upon an analysis of future values for the enterprise assuming various future outcomes. Within one of those potential outcomes, we utilized the OPM. The OPM treats the rights of the holders of convertible preferred stock and common stock as equivalent to that of call options on any value of the enterprise above certain break points of value based upon the liquidation preferences of the holders of preferred stock, as well as their rights to participation and conversion. Based on the timing and nature of an assumed liquidity event in each scenario, a discount for lack of marketability either was or was not applied to each scenario, as appropriate. We then probability-weighted the value of each expected outcome to arrive at an estimate of fair value per share of common stock.

In addition to considering the results of these third party valuation reports, our board of directors used assumptions based on various objective and subjective factors, combined with management judgment, to determine the fair value of our common stock as of each grant date, including:

 

 

the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant;

 

 

external market conditions affecting the life sciences research and development industry and trends within the industry;

 

 

our stage of development and business strategy;

 

 

our financial condition and operating results, including our levels of available capital resources, and forecasted results;

 

 

developments in our business;

 

99


Table of Contents
 

the progress of our research and development efforts;

 

 

equity market conditions affecting comparable public companies; and

 

 

general United States market conditions and the lack of marketability of our common stock.

Application of these approaches involves the use of estimates, judgment and assumptions that are subjective, such as those regarding our expected future revenue, expenses and future cash flows, discount rates, market multiples, the selection of comparable companies and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock. For valuations after the completion of this initial public offering, our board of directors will determine the fair value of each share of underlying common stock-based on the closing price of our common stock as reported on the date of grant.

Recent accounting pronouncements

For information on recently issued accounting pronouncements, see Note 2 to our consolidated financial statements in this prospectus.

JOBS Act accounting election

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected not to use this extended transition period. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.

 

100


Table of Contents

Business

Overview

Berkeley Lights is a leading Digital Cell Biology company focused on enabling and accelerating the rapid development and commercialization of biotherapeutics and other cell-based products. The Berkeley Lights Platform captures deep phenotypic, functional and genotypic information for thousands of single cells in parallel and can also deliver the live biology customers desire in the form of the best cells. This is a new way to capture and interpret the qualitative language of biology and translate it into single-cell specific digital information, referred to as Digital Cell Biology. We currently focus on enabling the large and rapidly growing markets of antibody therapeutics, cell therapy and synthetic biology with our platform. Our goal is to establish the Berkeley Lights Platform as the standard throughout the cell-based product value chain by increasing the probability of successful product development for our customers.

 

 

LOGO

Cells have tremendous capabilities and are an effective means to discover, develop and manufacture a wide range of products, including therapies for diseases, new and sustainable foods and industrial materials. Harnessing these capabilities requires finding and using the best cells, which can result in finding the next blockbuster drug or saving millions of dollars per year on manufacturing costs. However, biology is extremely complex and not deterministic. Cells are microscopic factories that make minute amounts of a variety of valuable proteins, such as antibodies, and therefore require a high degree of precision when analyzed individually. Finding the best cells can require searching through millions of cells, or often even more challenging, starting with a limited sample of precious cells. Finding the best cells requires more than just capturing a cell’s genetic code, it requires the deep understanding generated by functional characterization across many parameters, a process we call Deep Opto Profiling. Many existing methods to perform functional characterization of single cells are manual and fragmented processes that we believe do not scale to meet the significant challenges of measuring biological complexity. Furthermore, methods that characterize larger numbers of cells in bulk lack single-cell precision or operate at single-cell resolution but without functional

 

101


Table of Contents

validation of that cell. Successful cell-based product development requires living, functionally validated cells. We believe today’s methods functionally characterize insufficiently and too late in the process. We believe that harnessing the cell’s true capability, to develop biotherapeutics and other cell-based products, requires functional characterization of living single cells at large scale, cost effectively and in an integrated manner, early in the value chain.

We developed the Berkeley Lights Platform to provide the most advanced environment for rapid functional characterization of single cells at scale. The Berkeley Lights Platform consists of advanced automated systems that analyze live cells using proprietary consumables and application and workflow software to deliver robust single cell data. Our platform first characterizes the performance of cells relevant to the desired cell-based product early in the process and then connects this phenotypic data to the genetic code for each cell. In contrast, current genomic technologies find sequences first and fail to deliver the functional information early in the process. Functional validation early means letting poorly performing cells fail early while rapidly advancing the best candidates forward, before incurring significant research and development expense. We repeat this process of fail and advance many times throughout the process, delivering the best cells for what we believe will deliver the best product. We believe our platform rapidly provides the deepest information, with linked phenotypic and genotypic data, on tens of thousands of live single cells relevant to the customers’ end product specifications. We believe we are the only company exclusively focused on this approach to Digital Cell Biology, and we believe this level of scale and precision is not attainable with other approaches. This allows our customers to find the best cells by:

 

 

Performing rapid functional characterization of tens of thousands of single cells in parallel;

 

 

Precisely controlling the environment around each cell, and maintaining cells in a healthy state for further use;

 

 

Accessing a high degree of cell biodiversity;

 

 

Deep Opto Profiling of the relevant phenotypic characteristics, at single-cell resolution over time and connecting this to the genotypic information for each cell;

 

 

Performing a broad range of workflows, including single-cell assays, on an integrated platform; and

 

 

Digitally aggregating, accessing and analyzing a rich data library for each single cell.

Using our platform, customers can perform functional characterization of single cells at scale, effectively, more often and early in the product development process. We believe this enables them to find the best cells and best product candidates earlier and faster in their processes to:

 

 

Accelerate their product development cycles;

 

 

Improve process yield and lower costs throughout their value chain;

 

 

Enable a broad range of complex therapeutic modalities in biopharmaceuticals;

 

 

Increase the probability of successfully developing cell-based products;

 

 

Achieve revenue from their cell-based products sooner and potentially extend the product lifetime on the market prior to patent expiration; and

 

 

Increase return on investment for their cell-based products.

Our platform is a fully integrated, end-to-end solution, comprised of proprietary consumables, including our OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow

 

102


Table of Contents

software. Customers load onto our system their live cell samples, as well as media and reagents, then the cells are imported onto our OptoSelect chips where integrated workflows are performed to assess specific cell functions and attributes. Our platform captures and delivers rich single-cell data to find the best cells. We believe this brings common biological cell processing into the digital age. Our platform leverages proprietary OptoElectro Positioning (OEP) technology, which enables deterministic positioning of living single cells and other micro-objects using light. OEP is a core technology of our platform and allows for a high level of control over live single cells or other micro-objects throughout the functional characterization process. Our platform includes:

 

 

LOGO

 

 

OptoSelect chips—Proprietary single-use opto-fluidic chips on which thousands of single-cells are functionally characterized in parallel. Aided by our software, these chips use OEP to select and move thousands of cells and other micro-objects in parallel through a microfluidic circuit into individual nanoliter sized chambers we call NanoPens, located on the chips. Within the NanoPens, our platform can precisely control the environment, perform a large variety of single-cell assays and record with high resolution imaging each single cell over time, providing a predictable analytical window into live single-cell biology. Our OptoSelect chips contain up to 14,000 individual NanoPens on a single chip and are compatible with both mammalian and non-mammalian cells.

 

 

Reagent kits—Support on-chip phenotypic and genotypic single-cell assays and off-chip processes for upstream and downstream analysis and support multiple species and cell types. We also supply media and media additives for certain cell types.

 

 

Advanced automation systems—Three advanced automation systems, Beacon and Lightning, which are designed to run our proprietary workflows, and Culture Station, which allows our customers to increase the throughput of workflows requiring high volume, multi-day cell culture. Beacon can run workflows on four chips in parallel, utilizing up to 56,000 NanoPens, while Lightning runs workflows on one chip at a time.

 

 

Advanced application and workflow software—Tailored software packages that enable customers to design, automate and scale reproducible workflows and collect, aggregate, analyze and report data on each cell in each NanoPen, far beyond what we believe is possible with current manual workflows.

Our commercial workflows, each of which are distinct offerings, are made up of four modules we call Import, Culture, Assay and Export. These modules can be adapted, interchanged and deployed with a variety of single-cell assays to address specific applications and a variety of cell types. We believe this versatility facilitates rapid development of new workflow offerings and virtually unlimited workflow commercialization opportunities. We have developed and will continue to develop and commercialize proprietary workflows across large markets by leveraging existing workflows and assays. Over time, our goal is to enable customers to standardize many of their processes on our platform utilizing our workflows. We believe we are the only company commercializing a platform that can do this in a scalable way.

To drive new workflow development, we created our Berkeley Lights BioFoundry, which we believe represents the largest single location capacity for functionally characterizing cells. In our BioFoundry, we practice and develop workflows and functional assays that are applicable throughout the value chain of our target markets.

 

103


Table of Contents

Leveraging our BioFoundry’s capacity and the precision of our platform, we can also look deep into the immune repertoire to discover difficult to find proprietary biological assets, such as antibodies and TCRs, that may offer commercialization opportunities.

We have grown our workflow library with increasing velocity since the introduction of our first workflow in December of 2016, and as of May 31, 2020, we offered six commercial workflows incorporating sixteen assays and eleven cell classes. Our current workflows target customers in the antibody therapeutics, cell therapy and synthetic biology markets. Commonalities among certain workflows used to functionally characterize single cells in one market allow us to leverage the workflows developed for that market to improve and accelerate workflow development timelines for another market and facilitate adoption of our platform across markets.

 

 

LOGO

 

 

LOGO

While our platform is currently utilized primarily in the discovery and development stages of the value chain and marketed as research use only, or RUO, we believe that the capabilities of our platform will enable us to capture an increasingly greater share of our addressable market opportunity and the value chain across cell-based product industries, including being incorporated into the commercial manufacturing process. Our current workflows target customers in the antibody therapeutics, cell therapy and synthetic biology markets. We estimate that end market sales of cell-based products in antibody therapeutics, cell therapy and synthetic biology were approximately $148 billion in 2019 and are expected to grow to $255 billion by 2024 at an 11% CAGR. We believe there are approximately 1,600 companies, academic institutions, and governmental and other organizations currently focused on developing cell-based products, and we estimate our total addressable market to be approximately $23 billion. Our estimates of our total addressable markets are based on potential

 

104


Table of Contents

customer research and development spending, addressable aspects of potential customers’ end product development process, and potential platform usage. We also utilize estimated penetration and placement rates for our platform with potential customers in our target markets and historical patterns for consumables usage.

We believe we have established a solid foundation, from which to drive adoption of our platform across multiple markets, and across the value chain of cell-based product companies. As of December 31, 2019, our customer base was comprised of 45 customers, which include eight of the ten largest biopharmaceutical companies in the world ranked by 2019 revenue who comprised 18% of our revenue in 2019, biotechnology companies, leading contract research organizations, synthetic biology companies and academic institutions. Many of these customers are recent adopters and we believe there is significant opportunity to expand the use of our workflows and capitalize further throughout their value chains.

Our revenue has to date primarily been driven by early adopters of our technology for research and development purposes. Revenue was $31.3 million and $56.7 million for the years ended December 31, 2018 and 2019, respectively, and $12.6 million and $13.8 million for the three months ended March 31, 2019 and 2020, respectively. We generated net losses of $23.3 million and $18.3 million for the years ended December 31, 2018 and 2019, respectively, and $4.2 million and $8.4 million for the three months ended March 31, 2019 and 2020, respectively.

As of March 31, 2020, we had 210 full-time employees, including 77 employees with Ph.D. degrees.

Industry

Cells are the basic building blocks of life and have evolved over billions of years to create enormous biodiversity. They share significant common functions but can look and behave very differently. Cells can make valuable products and many of these products, such as biotherapies, cannot be economically produced any other way. Over the past two decades a main focus within cell biology has been on the understanding of the cell’s genotypic information. This has given rise to large markets like next generation sequencing, single-cell genomic analysis and synthetic biology. However, cells express genotypic information in a variety of ways that, in most cases, cannot be accurately predicted. There remains a significant gap in the understanding of how a cell’s genetic code truly impacts its function, behavior and performance. Connecting a cell’s genotype to its phenotype requires functional testing, which we believe has become a critical bottleneck in the development and manufacturing of biotherapeutics and other cell-based products.

Increased understanding of cells has enabled the discovery, development and production of therapies for diseases, new and sustainable foods, industrial materials and many other items. While the applications and markets for cell-based products are significant and rapidly growing, we believe we are only at the beginning of harnessing cells’ full capabilities. We estimate that cell-based products across the antibody therapeutics, cell therapy and synthetic biology end markets generated approximately $148 billion in sales in 2019, and are expected to grow to $255 billion by 2024 at an 11% CAGR.

 

105


Table of Contents

 

LOGO

The challenges of harnessing biology and making cell-based products

Biology is complex. It is highly diverse, integrated and not deterministic, and therefore presents a challenge of scale. Despite significant advances in the understanding of cells and their tremendous capabilities, cells are exceptionally challenging to work with. They are very complex, heterogeneous, and at any moment, thousands of processes occur inside a cell that impact its production of a multitude of proteins, its energy expenditure and its performance of a specific function. Cells are also sensitive to their environment. They interact with other surrounding cells and when removed from their in vivo environment can quickly change their phenotype or die. Experiments to find the best biotherapeutic may require searching through millions of cells or starting with a limited sample of precious cells. Cells are microscopic factories that make small amounts of a variety of valuable proteins, such as antibodies, and finding the best cells requires highly precise and sensitive measurements of such limited cell output. Addressing these challenges requires a solution that can functionally test thousands of cells in parallel at the single-cell level.

Limitations of existing methods for functionally characterizing cells

Significant progress has been made in the functional characterization of single cells. High resolution microscopy, fluorescent imaging, high-speed fluorescence activated cell sorting (FACS) and sequencing have all contributed individually to advancement of this field. However, integration of these capabilities and automation of these common methods across technologies remain lacking, and we believe an integrated workflow is critical for rapid advancement of the functional characterization of single cells. In addition, these methods typically result in the death of most cells involved in the process, preventing the re-capture of the best cells with the right characteristics for the cell-based product. Current technologies and methods are either only capable of handling large numbers of cells in bulk or performing bulk sequencing at the single-cell level without functionally characterizing each single cell. We also believe these methods inadequately capture the complex parallel processes happening within a cell, as they often only capture a single snapshot of the behavior in time. Living cells are real-time systems that change and adjust over time to environmental changes across a very large number of variables. Furthermore, each individual cell is different, and therefore measurements on one set of cells may not correspond to the actual characteristics of another set of cells, especially when the

 

106


Table of Contents

measurements are made at different points in time and under different environmental conditions. We believe common methods lack precision, do not capture the multidimensional aspects of cell behavior and do not scale to meet the significant challenges of measuring a cell’s biological complexity. As a result, functional testing is deployed insufficiently or ineffectively across the cell-based product value chain.

Finding the best cells requires a solution that enables:

 

 

Performing rapid functional characterization of tens of thousands of single cells in parallel;

 

 

Precisely controlling the environment around each cell, and maintaining cells in a healthy state for further use;

 

 

Accessing a high degree of cell biodiversity;

 

 

Deep Opto Profiling of the relevant phenotypic characteristics, at single-cell resolution over time and connecting this to the genotypic information for each cell;

 

 

Performing a broad range of workflows, including single-cell assays, on an integrated platform; and

 

 

Digitally aggregating single-cell information to create a rich data library for each cell.

Limitations of centralized biology

Infectious diseases emerge in single locations globally. In the early stages of epidemic outbreak, the sum total of the human immune response to the pathogen occurs in that single location. Unfortunately today’s biopharmaceutical discovery infrastructure is largely centralized and not well suited to rapidly respond to these emerging pathogens. The recent SARS-CoV-2 outbreak clearly demonstrated the challenge between local pathogen emergence and centralized response. The people who had the most immediate access to recovering patient blood did not appear to have immediate access to certain state-of-the-art antibody discovery technology. The people who had certain state-of-the-art technology did not have immediate access to recovering patient blood. We believe that the speed and ability to respond to emerging pathogens can be dramatically improved with a solution that is proximal to the initial outbreak. If a proximal solution was available at the initial outbreak of SARS-CoV-2, we believe functional antibodies could have been discovered months earlier. It is our vision to place the Berkeley Lights Platform at CDCs and regional centers of excellence worldwide. We envision these platforms will be networked via the cloud to provide global access to the latest Berkeley Lights workflows, to rapidly return diverse functional antibody sequences to biopharmaceutical companies for development and manufacture of the therapeutic antibodies. This capability could potentially enable rapid discovery and development of therapeutic antibodies targeting emerging pathogens anywhere in the world. This strategy could also be applied to endemic infectious diseases in the ongoing search for broadly neutralizing antibodies. We believe that the Berkeley Lights Platform can leverage automation, workflow standardization and Deep Opto Profiling to become a key enabler of this form of distributed biological processing.

Digital Cell Biology enabled by the Berkeley Lights Platform

Digital Cell Biology

Digital Cell Biology is a new way to capture and interpret the qualitative language of biology, both phenotypic and genotypic information, from a highly biodiverse cell population, and translate it into a single-cell specific digital deep profile. The Berkeley Lights Platform combines bioscience, information and technology to deliver deep phenotypic and functional information linked to genotypes across thousands of living cells in parallel at the single-cell level. Using our platform, customers can leverage the power of Digital Cell Biology to rapidly engage in Deep Opto Profiling of cells they wish to understand, characterize and use in their cell-based product development processes.

 

107


Table of Contents

The Berkeley Lights Platform

We developed the Berkeley Lights Platform to create the most advanced environment for functional testing of single cells and provide customers local access to Digital Cell Biology for developing cell-based products on a global scale. Our platform delivers live biology, in the form of the best cells for the desired cell-based product. Using our platform, customers perform integrated workflows specific to a field of use to profile and capture relevant single-cell data, throughout the duration of the workflow, on tens of thousands of cells individually, in parallel and within a contained and precisely controlled environment.

Our platform is a fully integrated, end-to-end solution, comprised of proprietary consumables, including our OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software. Our platform leverages our proprietary OptoElectro Positioning (OEP) technology, which provides deterministic positioning of living single cells and other micro-objects using light. We believe our platform delivers a high level of control over, and preservation of, living single cells or other micro-objects throughout the functional characterization process.

 

 

LOGO

 

108


Table of Contents

Our platform also uses our proprietary NanoPen technology. NanoPens are small, roughly 1 nanoliter (or 1/50,000th of a drop of water) sized chambers, with proprietary surface coatings that provide precise and deterministic control of the environment around the cells. Through biomimetic design, our platform provides nutrients to, and removes waste from, each NanoPen to keep the cells in a healthy state while outside of their native environment. These mechanisms enable performance of a large variety of single-cell assays on live biology, including single-cell real-time imaging at high resolution.

 

 

LOGO

 

109


Table of Contents

OptoSelect chips

Using OEP we select and move cells and other micro-objects in parallel into NanoPens on our proprietary OptoSelect chips. Within the NanoPens, our platform can precisely control the cell environment, perform a large variety of single-cell assays and real-time image each single cell, providing a predictable analytical window into live single-cell biology. We currently offer five types of OptoSelect chips, with different designs and numbers of NanoPens for various workflows. Our largest commercially available chip has 14,000 pens, and is primarily used for our antibody discovery workflow with plasma cells. OptoSelect chips are single-use consumables and replaced after each workflow.

 

 

LOGO

Reagent kits

We have commercialized a broad range of reagent kits that have been validated in the workflows using our platform. These reagent kits support the on-chip analysis on our advanced automation systems as well as many other upstream and downstream processes. Our reagent kits provide a variety of capabilities and benefits, including:

 

 

Sample preparation;

 

Modification of the surface chemistry in our chips to enable both adherent and non-adherent cell culture;

 

Enhancement of the culture of single cells including prolonging cell life;

 

Media and media additives for primary cells and other cell types;

 

Assays, such as binding, blocking and functional;

 

Quantification of antibody production that are animal component-free;

 

Lysis and capture of a single cell’s specific genomic material in a NanoPen; and

 

Enablement of a wide range of other phenotypic and genotypic assays.

In addition, our reagent kits have been optimized to support multiple species and cell types including mammalian cells such as B cells, T cells and dendritic cells, and non-mammalian cells including yeast and bacteria.

Advanced automation systems

We currently offer three advanced automation systems, Beacon and Lightning, which are designed to run our proprietary workflows, and Culture Station, which allows our customers to execute workflows requiring high volume, multi-day cell culture without breaking the continuity and control provisions of a single program run.

 

110


Table of Contents

Beacon

 

 

LOGO

Launched in December of 2016, Beacon is a fully automated, high throughput system that enables workflows on four OptoSelect chips in parallel, utilizing up to 56,000 NanoPens. Beacon captures brightfield and fluorescence images to track and assay individual cells across multiple points in time to allow Deep Opto Profiling of phenotypic and genotypic information on single cells. Beacon is used by our customers for high throughput applications, including antibody discovery and cell line development. Since its launch, we have focused on continuous improvement efforts in the form of activating additional system-level capabilities and enhancements, in turn, enhancing the value of the system for our customers. We will continue to evolve Beacon to further facilitate distributed decentralized biological processing globally.

Lightning

 

 

LOGO

Launched in June of 2019, our Lightning desktop system supports workflows on a single chip. Lightning captures brightfield and fluorescence images to track and assay individual cells across multiple points in time and allows Deep Opto Profiling of phenotypic and genotypic information on single cells. Lightning automation

 

111


Table of Contents

and throughput makes it an ideal system for customers to perform assay development for our platform and run lower throughput workflows.

Culture Station

 

 

LOGO

Launched in January of 2020, Culture Station enables the on-chip culture of cells outside of Beacon and Lightning, where workflows require an extended cell culture period. Culture Station consists of independent media, fluidics and software and can be seamlessly integrated into Beacon and Lightning workflows. Rather than occupy those systems during the Culture module, customers can transfer up to eight of our OptoSelect chips from Beacon or Lightning onto Culture Station. Once culture is completed, the chips can be moved back to Beacon or Lightning for further analysis. This seamless interface between systems increases throughput when cell culture becomes a constraint. Parallel processing of culture while simultaneously running assays on Beacon or Lightning reduces the product development cycle time and lowers cost, maximizing benefits to our customers.

Advanced application and workflow software

Software is a core capability of Berkeley Lights and a key element of our platform. We believe that we have developed proprietary automation and analysis software that facilitates running our systems, as well as the analysis and reporting of the data from workflows far beyond what is possible with traditional manual workflows. Our software includes:

 

 

Cell Analysis Suite (CAS) is our premier and primary application. It is the platform management system software that is the foundation for all workflows run on Beacon and Lightning. CAS software controls the systems, acquires and analyzes data and directs all operations included in each automated workflow, including cell and NanoPen selection, on-chip immunoassay analysis, real-time single-cell imaging, automatic clone selection and removal from the NanoPens and exporting living cells. New versions of CAS are released over time to provide incremental improvements of the user experience and support new applications.

 

 

Workflow Runner/Builder is used to develop and run all of our workflows on our platform. It is used within our company as a development tool but also gives our customers the power to create, change, configure, save and automate complex workflows. Customers can customize workflows with the click of a mouse allowing for rapid workflow development and deployment.

 

 

Assay Analyzer provides analysis of the visual history of each cell in a NanoPen. Using the unique chip and NanoPen identification, the Beacon or Lightning user can conduct the analysis of assays, morphology, growth rates and other characteristics across all NanoPens. Using multi-dimensional graphs and filters, the user can select NanoPens of interest for export. Assay Analyzer also provides analysis and reporting, including complete images for proof of monoclonality useful for electronic records and regulatory reports.

 

112


Table of Contents
 

Image Analyzer is a dynamic visualization application providing high resolution and real-time imaging of each NanoPen and its contents. Image Analyzer includes tools for optimizing cell counting, assay analysis and cell tracking over time, including particle counting for cells and beads, fluorescence identification of hits from positive assays, construction of high resolution images from fluorescence channels, cell scoring by color and recording of the imaging data.

 

 

PrimeSeq is an analysis and reporting tool integrating single-cell sequence library preparation into application-specific workflows. PrimeSeq can link sequencing files on each individual cell directly back to the specific NanoPen location for that cell. Using PrimeSeq and CAS, the Beacon and Lightning user can perform on-chip mRNA capture and reverse transcription, create single-cell sequencing libraries from select live single cells and explore phenotypic and genotypic information.

Workflows using our platform: Import, Culture, Assay and Export

Our customers have access to Berkeley Lights proprietary workflows, but can also develop and run their own customized workflows utilizing our Workflow Runner/Builder application software. The four modules of a workflow, Import, Culture, Assay and Export, are detailed below and depicted in simplified figures for purposes of illustration:

Import

 

 

LOGO

Cells are imported to the OptoSelect chip through a microfluidic path. Once in the main channel, cells are imaged, and then moved into the NanoPens using OEP technology.

The Import module begins after the customer loads the cell sample onto our advanced automation systems, and the system loads the sample into our OptoSelect chips. During the Import module, the customer uses our CAS software to select the cells and micro-objects of interest, and then our OEP technology is used to move the selected cells into NanoPens. This can be repeated multiple times so that, for example, a single NanoPen can be loaded with a bead, a cell to be interrogated and a reporter cell. Import can also be performed at various points during a workflow, for example, importing an antigen-specific bead during the Assay process.

Culture

 

 

LOGO

 

113


Table of Contents

Inside the NanoPens, cells can grow and divide under precisely controlled conditions. Our platform enables accurate control of the media around the cell to provide nutrients and remove waste products, allowing for optimal growth conditions. Additionally, our platform uses brightfield imaging of the cells, during the Culture module to track growth rate, cell diameter, circularity, motility and other morphological features in real-time. This module can also be run in parallel on Culture Station, without imaging, for higher chip throughput applications or when required cell culture times are long.

Assay

 

 

LOGO

During the Assay process, each NanoPen is imaged in up to five fluorescent channels, monitored and the behavior of each cell collected digitally over time and across a range of parameters relevant to the desired application. Our platform can measure a wide range of surface markers, the rate of secreted factors, the functional responses of those secreted factors and cell-to-cell interactions. For example, using Import functions, our platform can place a tumor cell in the same NanoPen as a T cell and then using Assay functions, watch the T cell attack the tumor cell and digitally record the interaction including fluorescent markers that signal death of the tumor cell. We are also able to capture the mRNA of the single cell in each NanoPen for downstream sequencing applications. Using our OptoSeq Library Kits customers can lyse, capture and barcode genetic information from select cells on a single OptoSelect chip, conduct reverse transcription, create cDNA libraries for sequencing and link sequencing results back to the unique cell identifiers.

Export

 

 

LOGO

Cells are exported from the OptoSelect chip to a well plate through a microfluidic path. Individual cells of interest can be precisely selected with our OEP technology and exported into a 96 well plate for further processing. Our platform enables the selection and export of individual single cells and other micro-objects at any time during the workflow either to remove cells of interest for further processing or to export cells not further needed and continue Assay on cells of interest. Our platform can export live single cells, groups of cells and clones into a humidified and temperature controlled well plate.

Business model and platform access

Our business model is focused on driving the adoption of the Berkeley Lights Platform and maximizing its use across our customers’ value chains. This is achieved by enabling more functional testing of single cells throughout our customers’ value chains and by finding opportunities for customers to perform single-cell functional testing earlier in their product development process to advance better product candidates. We engage with potential customers to identify a significant challenge they are facing and then evaluate which of

 

114


Table of Contents

our workflows and underlying assays can address their problem. Customers can gain access to our platform via direct purchase, subscription or strategic partnership. In many cases we can address customers’ needs with existing or variants of existing workflows. Alternately, we may form strategic partnerships to develop substantially new workflows with our customers to address their needs. For the years ended December 31, 2018 and 2019, revenue was $21.2 million and $39.1 million from direct purchase (or 68% and 69%, respectively), respectively, none and $89,000 from subscription (or 0% for both periods), respectively, and $6.9 million and $9.6 million from strategic partnerships (or 22% and 17%, respectively), respectively. For the three months ended March 31, 2019 and 2020, revenue was $9.0 million and $9.4 million from direct purchase (or 71% and 69%, respectively), respectively, none and $55,000 from subscription (or 0% for both periods), respectively, and $2.3 million and $1.9 million from strategic partnerships (or 18% and 13%, respectively), respectively.

 

 

LOGO

Our growth strategy

Our goal is to establish the Berkeley Lights Platform as the standard throughout the cell-based product value chain and drive substantial conversion of current cell biology workflows onto our platform. Our growth strategy is comprised of the following elements:

Drive new customer adoption of the Berkeley Lights Platform

Since the commercial launch of our platform in December of 2016 through December 31, 2019, 45 customers had leveraged our platform to perform a variety of workflows. We drive customer adoption globally within our initial target markets of antibody therapeutics, cell therapy and synthetic biology through business development efforts; a direct sales and marketing organization in the United States, parts of Europe and China; and third party distributors and dealers in Asia.

 

115


Table of Contents

Expand the utilization of workflows across our customers’ value chains

We are driving the adoption of workflows using our platform across our existing customers’ value chains. We are doing so by developing new workflows for use at multiple points within the discovery, development and production phases of our customers’ value chains. For example, customers that use our workflows for the antibody discovery phase may purchase our cell line development workflows to help within the development and production scale-up phases.

Increase the value of our workflows to our customers

We are increasing the value of our workflows by building additional assays that can be used with a given workflow and by further integrating the workflows into our customers’ existing processes. We are also expanding the upstream and downstream reach of our workflows. This increases the workflow value to our customers and enables us to share in that cost of ownership benefit. For example, we developed our Opto Plasma B Discovery 2.0 to improve the features of Opto Plasma B Discovery 1.0. This was achieved by increasing scale and adding sequence library preparation into our workflow, making the process easier and more efficient for our customers and enabling them to more broadly screen the antibody diversity of animals. We have multiple generations of workflows for antibody discovery and cell line development, and are developing new generations of workflows, including for cell therapy development, incorporating additional capabilities that have value for our customers.

Drive utilization of our workflows and adoption of our platform across multiple customer sites

We increase usage of our platform with existing customers by driving adoption of multiple advanced automation systems either to support multiple locations or drive increased usage of our workflows in any given location. There is an opportunity to increase utilization of our platform throughout our customers’ organizations. We accomplish this through a combination of sales and business development efforts as well as through our customer success organization to help customers to standardize their processes globally at multiple sites using our platform.

Develop and monetize proprietary biological assets from our BioFoundry

Within our Berkeley Lights BioFoundry, we practice and validate workflows. In certain cases, we may use our own biology as part of this validation process. This enables us to commercialize new workflows and may also generate proprietary valuable biological assets we could sell outright or license to customers, such as functionally validated antibodies or new organisms applicable to synthetic biology.

Expand adoption of the Berkeley Lights Platform into new markets

Our market entry strategy involves identifying markets that have significant constraints which can be addressed by our platform. This can be specific to certain diseases or pathogens and/or involve new therapeutic modalities and/or cell types. We drive our expansion into new markets by developing workflows for those markets, either by adapting existing workflows or by partnering with leaders in those markets to develop workflows that address their significant unmet needs but also have general value for other customers in that market. These partnerships can result in joint development of specific workflows and assays involving upfront and milestone arrangements. Depending on the agreement, we could also negotiate end product revenue participation through royalties.

 

116


Table of Contents

Our workflow and assay library

As of May 31, 2020, we offered six commercial workflows, incorporating sixteen assays that address different phases of our customers’ cell-based product value chains in our target markets. In each of these markets we are developing additional workflows that can extend use of our platform across our customers’ value chains and perform single-cell functional testing at critical yield steps as early as possible in their respective processes. We are also developing workflows to enter new cell-based product markets. Workflow development and market expansion are a function of incorporating additional cell types, product specific assays or adapting the four basic workflow modules.

We use our Berkeley Lights BioFoundry, which we believe represents the largest single location platform capacity globally, to drive new workflow development and functionally characterize cells. In our BioFoundry, we practice and develop workflows and functional assays that are applicable throughout the value chain of our target markets. Leveraging our BioFoundry’s capacity, we can also look deep into the immune repertoire to discover difficult-to-find proprietary biological assets, such as antibodies and TCRs, that may offer commercialization opportunities.

 

 

LOGO

The output of a workflow is to recover the best cells and best product candidate by recording critical data such as relevant phenotypic characteristics, genotypic information and multiple, high resolution images over time on thousands of cells, on an individual cell basis. This is a process we refer to as Deep Opto Profiling, a critical component of Digital Cell Biology. We believe Deep Opto Profiling delivers a significant amount of relevant phenotypic, genotypic and imaging information for each single cell, across a number of interconnected dimensions, allowing our customers to find the best cells for their desired product.

 

117


Table of Contents

LOGO

Through our platform, customers can now link the Deep Opto Profiling data to each cell’s genomic expression. For example, some customers are using our platform to recover paired heavy and light chain antibody sequences and others are using our platform to capture mRNA from target cells for gene expression profiling. Customers can characterize the transcriptome of the highest producing clones. We expect that customers will be able to use this linked data to improve cellular models which may enable better organism design. We envision Deep Opto Profiling data will be aggregated and made accessible via the cloud to existing and new customers, which over time could become a part of our distributed biology strategy and our product offering.

Antibody therapeutics workflows

In the antibody therapeutics market, as of May 31, 2020, we offered five commercial workflows, three targeting the discovery phase and two targeting the development phase of this market.

Opto Plasma B Discovery workflows versions 1.0, 2.0 and 3.0 – These workflows enable customers to functionally characterize single B cells to discover antibody therapeutic candidates. We designed our Opto Plasma B Discovery workflows to provide access to the highest level of biodiversity and to discover rare functional antibodies that cannot be easily or cost-effectively found with other common methods, such as hybridoma, or methods that involve sequencing B cells first and performing functional testing later. Our Opto Plasma B Discovery workflows can deliver functional monoclonal antibody sequences in three days, which compares to weeks or months using common methods.

 

118


Table of Contents

 

LOGO

 

 

LOGO

Opto Viral Neutralization 1.0—We adapted the modules and assays from our Opto Plasma B Discovery workflow 1.0 to enable recovery of antibodies from both immunized animals and human patients exposed to emerging and dangerous pathogens, like SARS-CoV-2. We developed reagent kits to process blood from patients surviving viral infection in order to find antibodies from both plasma and memory B cells against the virus. Using our platform, GenScript made an early discovery of binding antibodies in China against SARS-CoV-2. As part of our direct work on COVID-19, we have been collaborating with Vanderbilt University Medical Center in conjunction with the Department of Defense, to use Opto Viral Neutralization 1.0 to discover therapeutic antibody candidates. This work has resulted in the discovery of hundreds of antibody sequences from a single recovering patient targeting SARS-CoV-2. We are currently in beta release of this workflow and plan to commercially launch Opto Viral Neutralization 1.0 in mid-2020.

While our recent efforts have been focused on SARS-CoV-2, we believe that Opto Viral Neutralization 1.0 can be leveraged to discover potential therapies for many viruses and other emerging pathogens. The ability to process human patient samples provides access to the immune repertoire and antibodies that may represent therapeutic candidates for other infections suffered in the past. Previously, tapping directly into the human immune repertoire was not economically feasible because of the high costs associated with sequencing, re-expression and functional testing of thousands of cells. Our platform and Opto Viral Neutralization 1.0 allow for upfront functional screening which makes accessing the repertoire economically feasible.

Opto Cell Line Development versions 1.0 and 2.0—Following antibody discovery and antibody engineering, our Opto Cell Line Development workflows enable finding the highest productivity cell line by repeating the Culture and Assay modules on a small clone of 4 to 60 cells derived and grown from a single cell isolated on our chip. These workflows shorten the time to find the best production cell lines from 8 to 12 weeks for well plate-based approaches down to 1 week using our platform. Operation of a single large-scale bioreactor can cost approximately $50 million annually. The potential annual cost savings for finding a clone with just 20% higher titer could be on the order of $10 million per year per large-scale bioreactor. In certain cases, some customers have demonstrated even greater increases in titer. Our workflows also enable >99% monoclonality assurance, a quality metric important for regulatory approval, in the same workflow. By contrast, limiting dilution, a

 

119


Table of Contents

common method to provide monoclonality assurance, takes approximately four weeks and only achieves approximately 96% monoclonality assurance.

 

LOGO

 

 

LOGO

Cell therapy workflows

As of May 31, 2020, we offered one commercial workflow for cell therapy development. We are also developing our platform to serve as an integrated solution to develop and manufacture T cell therapies, as well as monitor a patient’s immune response to such therapies.

Opto Cell Therapy Development workflow version 1.0—We announced version 1.0 in April of 2020, which enables customers to isolate, define and identify poly-functional T cells by precisely assembling T cell-target cell interactions in NanoPens. Our platform can selectively import phenotype specific T cells, cancer cells and cytokine capture beads into the NanoPens and co-culture them to determine what percentage of the T cell population demonstrates antigen-specific activation through multiple cytokine secretion measurements. Using this workflow, customers can also perform a time-lapse cytotoxicity assay in the NanoPens with T cells that have the ideal poly-functional cytokine phenotype to provide functional measurement of the T cell’s effectiveness in killing single or multiple tumor cells over time. It can be used to select specific T cells for TCR recovery and sequencing to accelerate the development of potential new cell therapies. With the Opto Cell Therapy Development 1.0, which includes the use of dendritic cells, our customers can evaluate thousands of individual T cells in parallel in a single day and on a single platform, and quickly derive actionable information on T cell function and then select and export the desired live cells for further downstream processing.

 

120


Table of Contents

Opto Cell Therapy Development workflow version 2.0—We are currently developing Opto Cell Therapy Development 2.0 which will upgrade 1.0 to include upstream off-chip activation and expansion of T cells prior to on-chip selection, using multi-cytokine and cytotoxicity assays. Opto Cell Therapy Development 2.0 will eliminate the need for dendritic cells, which will reduce overall process variation, time and cost.

 

 

LOGO

 

 

LOGO

Fully integrated cell therapy solution—We are developing workflows and a new advanced automation system to enable our platform to be deployed as a fully integrated solution for manufacture and therapy monitoring of cell therapies. We believe that these additions to our platform can address critical challenges and could enable the production of cell therapies on an integrated platform in a decentralized setting, close to the patient.

Synthetic biology workflows

In September of 2019, we signed a collaboration agreement with Ginkgo, a leader in the synthetic biology market, or the Ginkgo Agreement. Under the Ginkgo Agreement, Ginkgo has agreed to incorporate the Berkeley Lights Platform into its automated genetic engineering foundries. The collaboration will, among other things, drive jointly developed workflows that will help provide continued growth in output and efficiency of Ginkgo’s foundries and will establish our commercial workflow offering in the synthetic biology market. We are currently developing multiple workflows encompassing a variety of organisms with Ginkgo. For more information regarding our collaboration with Ginkgo, please see “—Intellectual property—Licenses and collaboration—Ginkgo collaboration agreement.”

 

121


Table of Contents

Market opportunity

While our platform is currently utilized primarily in the discovery and development stages of the value chain and marketed as research use only, or RUO, we believe that the capabilities of our platform will enable us to capture an increasingly greater share of our addressable market opportunity and the value chain across cell-based product industries, including being incorporated into the commercial manufacturing process. Our current workflows target customers in the antibody therapeutics, cell therapy and synthetic biology markets. We estimate that end market sales of cell-based products in antibody therapeutics, cell therapy and synthetic biology were approximately $148 billion in 2019 and are expected to grow to $255 billion by 2024 at an 11% CAGR. We believe there are approximately 1,600 companies, academic institutions, and governmental and other organizations currently focused on developing cell-based products and we estimate our total addressable market to be approximately $23 billion, which includes addressable markets of approximately $6 billion in antibody therapeutics, approximately $15 billion in cell therapy and approximately $2 billion in synthetic biology. Our estimates of our total addressable markets are based on potential customer research and development spending, addressable aspects of potential customers’ end product development process, and potential platform usage. We also utilize estimated penetration and placement rates for our platform with potential customers in our target markets and historical patterns for consumables usage.

Antibody therapeutics market opportunity

We believe traditional methods for antibody therapeutics discovery and development are lengthy and inefficient. According to a 2016 study by Tufts Center for the Study of Drug Development, developing a drug costs on average $2.6 billion. Development of a drug can also take an average 10 years to develop according to research published in 2015 by PhRMA. Furthermore, antibody therapeutics drug discovery and development are becoming more challenging as companies continue to pursue more complex drug targets, and use new modalities such as multi-specific antibodies. This rising complexity increases the time and cost of the pharmaceutical discovery and development cycle and puts further pressure on returns on investment in the antibody therapeutics industry. According to research published by the Deloitte Centre for Health Solutions in 2019, the top 12 biopharmaceutical companies ranked by research and development spend in 2009, saw their internal rate of return on research and development spend decline from 10.1% in 2010 to 1.8% in 2019.

Plasma B cell antibody discovery workflow market opportunity

The antibody therapeutics discovery process involves screening hundreds of thousands of antibody secreting cells to select a few final cell candidates to move into later stages of development. These cells are generally harvested from immunized animals that are having an immune response to the target disease being addressed. The response to any immunogen can vary wildly and, in certain cases, yield only a few cells that may secrete attractive antibody candidates for downstream development. Finding these rare cells is analogous to searching for a “needle in a haystack.” We believe that methods to rapidly functionally screen B cell repertoires are required to meet the demand for fast-paced therapeutic antibody discovery and that common methods are inadequate. The common methods for selecting candidates are characterized by high losses in biodiversity prior to functional screen for the desired antibody, or by skipping any functional screening before sequencing. This can increase the sequencing cost by hundreds of thousands of dollars and significantly extends the time for discovery of functionally validated candidates. The dilemma created by these two approaches is to either manage discovery and development cost in exchange for less biodiversity and yield, or to maximize biodiversity and yield, but increase time and costs. We believe the Berkeley Lights Platform addresses this dilemma and provides cost competitive access to the highest biodiversity, yield and the shortest discovery time.

 

122


Table of Contents

Current methods and limitations

Developed approximately 45 years ago, the hybridoma method remains the most common way to discover antibodies. However, we believe that the hybridoma method has significant inefficiencies. It generally takes approximately 8 to 12 weeks to complete a campaign and results in 99.9% process-based loss of the relevant immune repertoire at the beginning of the process. This biodiversity loss is particularly devastating for antibody discovery campaigns involving challenging immunogens, wherein the antigen specific repertoire is limited. This problem can be exacerbated if the starting cell sample is limited from the beginning, for example in the selection of plasma cells from human blood for antibodies. Furthermore, the hybridoma method generally is not used with certain cells such as lymph nodes or bone marrow, which contain some of the most attractive therapeutic candidates.

More recently, the antibody therapeutics industry has been implementing a direct B cell sequencing method to circumvent the biodiversity losses in the hybridoma method. While this allows for capture of a large part of the immune repertoire, it requires a very large number of sequences to be re-expressed, including for cells that may not have the desired functional characteristics. This method requires a tradeoff between increased biodiversity capture and cost to re-express thousands of potentially non-functioning antibodies. Re-expression of a single sequence in a cell line costs hundreds of dollars, and when multiplied by thousands of sequences, the total cost becomes significant.

Our platform performs early functional validation at the single B cell stage when the maximum immune repertoire is available. Our Opto Plasma B Discovery workflows discover functionally diverse therapeutic antibody candidates in days as compared to 8 to 12 weeks for hybridoma or approximately 5 to 8 weeks for direct B cell sequencing. One of our customers performed more than 15 hybridoma campaigns over multiple months and found only one hit, which turned out not to be a lead candidate. Using our platform to run our Opto Plasma B Discovery 1.0 workflow, the customer found over 200 hits.

Antibody discovery for viral neutralization market opportunity

Emerging viral pathogens are a threat to human life and the global economy. Rapid discovery and development of antibody therapeutics targeting emerging viral pathogens is a critical and unmet global need. As exemplified by the ongoing COVID-19 pandemic, time required to develop a therapeutic is critical, and days matter. B cell-based antibody drug discovery targeting an emerging viral pathogen can begin as soon as a patient has recovered. Access to the blood of recovering patients, therefore, becomes of paramount importance. We believe there is a significant advantage to be able to deploy the Berkeley Lights Platform locally across the globe, to have proximity to the sites of initial viral infection.

We recently created the Global Emerging Pathogen Antibody Discovery Consortium (GEPAD) to attack COVID-19 and other emerging viral pathogens. Leveraging the Berkeley Lights Platform, including our Opto Viral Neutralization 1.0 workflow, consortium members are engaging in rapid antibody discovery against emerging pathogens and advancing workflow development. We believe our platform can use the blood of recovering patients as the foundation for therapeutics, with COVID-19 representing a first example. Our goal is to create the quickest therapeutic response to emerging viral pathogens globally.

Opto Cell Line Development workflows market opportunity

Once antibody product candidates have been discovered, the functionally confirmed lead candidates move through antibody engineering to cell line development for the identification of clonal lines capable of producing product antibody at low cost, high quality and scale. Customers in the antibody therapeutics industry, therefore, require stable, monoclonal production cell lines that produce high titers of antibody in their

 

123


Table of Contents

production bioreactors. The productivity of the cell line has a strong correlation to the production cost and output.

We believe, much like the antibody discovery process, common cell line development methods are time consuming and laborious. In commonly used cell line development methods, the time from expansion through selection and cloning of production clones can take from 8 to 12 weeks. Our Opto Cell Line Development workflows find the high production cell lines in less than one week.

Common cell line development methods employ well plate-based screening of Chinese hamster ovary, or CHO, cell transfections to identify potential candidate clones for scale up. Once the transfected and selected CHO cells are cloned into well plates and cultured for weeks, the antibody titer is measured. Although well plates poorly predict titer measurements in large scale bioreactors, they are often used as a low-quality tool for initial down-selection of the cells. Our platform enables functional productivity screening of thousands of individual CHO clones to find the best cells and we believe our platform does so faster and more efficiently than common cell line development methods.

Cell therapy market opportunity

Cell therapy is a rapidly growing biopharmaceutical market that holds significant potential, particularly in treating certain cancers. According to Evaluate Pharma, end market sales in cell therapy reached $1 billion in 2019 and are projected to grow to $14 billion by 2024 at a 68% CAGR. We are focused on, among other things, the development and manufacture of patient-specific, autologous cell therapies. These therapies are custom manufactured for each patient as compared to antibody therapeutics where a single therapy can serve millions of patients. To date, there are two FDA approved autologous T cell therapies for cancer, but there are hundreds of clinical trials underway. In a typical autologous cell therapy workflow, T cells are extracted from a cancer patient, genetically altered and manufactured in a centralized facility, and then returned and infused into the patient.

Cell therapy is a newly emerging therapeutic modality, and many challenges to safety, efficacy and cost remain. Due, in part to the complexity and significant risk and side effects, cell therapies are only approved for patients with very advanced cancer. Given the compromised immune system of these patients has fewer capable T cells to begin with, finding and preserving the best cells to treat the cancer is essential. The critical challenges in this field are to keep the precious cells alive, dramatically improve cell characterization and reduce manufacturing time and the time to prepare the therapy for reintroduction to the patient. Today’s methods can take weeks from the time cells are taken from the patient until they are re-infused into the patient. The time and cell losses of cell extraction, labeling, freezing, shipping, receiving, identity verification, thawing, producing, analyzing, reformulating and reanalyzing, before freezing again, and shipping back to the point of care, make cell therapy adoption challenging. Centralization of these therapies, far removed from the patients, not only adds time but also requires freezing the cells. This leads to losses of very precious patient cells impacting the ability to manufacture the therapy. Finally, current cell therapies are expensive, limiting their broader use and availability.

We believe our solution has the potential to:

 

 

Improve the safety and efficacy of a cell therapy by improving patient diagnostics, monitoring and cell-based quality controls during manufacturing;

 

 

Utilize data to help determine optimal dosage;

 

 

Increase availability by scaling even minute usable T cell samples to therapeutically useful dosages; and

 

 

Improve manufacturing process and cycle time, resulting in a more predictable, timely therapy for patients.

 

124


Table of Contents

We believe there is a significant opportunity to simplify these methods with a closed, fully automated and self-contained cell therapy manufacturing system, decentralized, in proximity to the patient, operated at the point of care setting. We believe the expertise we have gained to manipulate, culture and interrogate cells can be leveraged to deploy our platform as a differentiated solution in this emerging market.

Opto Cell Therapy Development workflow market opportunity

Characterization of T cell therapeutics demand proof of potency, specificity, identity and sterility. The Opto Cell Therapy Development workflows are designed to measure critical quality attributes for cell therapies. For example, to assess product purity and identity, target cells, which express the therapeutically relevant antigen, and non-target cells, which do not express the antigen, can be preloaded into different sets of NanoPens on our OptoSelect chip, along with cytokine capture beads. A T cell product can then be imported into the chip. An assessment of product purity and identity can be made at this point. Recognition of the target antigen leads to the release of cytokines by the T cells and the magnitude of the release can be quantified and digitally captured. In addition, the absence of a response to the non-target cells can be verified. In this way, we expect in the future to generate a statistical analysis across thousands of individual measurements to assess the potency, specificity and identity of the cell therapy. This analysis could be performed at any point or at multiple points in the manufacturing process. We are currently extending these assay methods to measure other T cell responses to antigens, such as proliferative and killing capacities, for exploratory cell product characterization. In designing an end-to-end autologous cell therapy manufacturing system, we are embedding our OptoSelect chip-based analytics as a core capability.

 

 

LOGO

Pictured above: Assembly, visualization and characterization of individual cell-cell interactions and recovery of live cells of interest

 

125


Table of Contents

Cell therapy manufacturing market opportunity

The currently deployed centralized method for T cell manufacturing is long and laborious, has many manual steps, and results in significant amounts of product variation and high cost. We believe that our platform can address critical challenges and enable physicians and scientists to cost effectively discover, assess, develop and scale manufacturing of cell therapies on an integrated platform, located at the point of care.

We believe we can adapt our platform to accelerate the development path for cell therapies by automating and decentralizing the cell therapy manufacturing process. Our assays can measure the quality of the manufactured cell therapy product during the manufacturing process. We envision that cell therapies, enabled by our platform, can become defined, well characterized drug products, manufactured in proximity to the patient, generally at a lower cost than currently approved therapies.

We envision that each cell therapy treatment manufactured would be patient-specific and would require our OptoSelect chips and reagent kits on a per patient basis. Once a cell therapy has received regulatory approval on our system, we could become the manufacturing process of record for these therapies moving forward.

Pictured below: Cell therapy manufacturing system currently under development

 

 

LOGO

Cell therapy patient monitoring workflow market opportunity

Careful monitoring of patients throughout the duration of cell therapy treatment, from preparing and considering treatment options to monitoring the long-term recovery of the patients post therapy, is a crucial success factor. Collecting source material is critical to the selection of the final cell therapy and to the manufacturing process. Because currently approved cell therapies are autologous, patients must be evaluated carefully before they become candidates for the cell therapy.

We believe that immune monitoring of patients before and after cell therapy could be extremely valuable. Treatment options will be informed by the understanding of tumor microenvironments and mechanisms of patient specific immune-suppression by tumor. Our platform is highly efficient for extracting information from small cell samples. For example, samples from fine needle aspirates are usually recovered using an 18 or 22 gauge needle connected to a 1mL-2mL syringe barrel. This small volume contains very few cells and cannot be

 

126


Table of Contents

effectively run on a FACS machine or injected into a mass spectrometer. More importantly, neither FACS machines nor Mass Spectrometers can provide the functional assessments associated with cytokine release and cytotoxicity needed to determine if any T cell infiltration was associated with tumor cell killing. The Berkeley Lights Platform is well suited for processing these small and precious primary cell samples. By leveraging the cell therapy development assays from our Opto Cell Therapy workflows, we expect that we can quickly assemble workflows that will provide a functional assessment of an animal’s or a patient’s immune response in pre-clinical or clinical work, respectively. We believe this will further accelerate the rate at which lifesaving therapeutics can reach the market and to patients that need them. We also believe these workflows may have the opportunity to become companion diagnostics for cell therapies in the future.

Our market research, comprised of interviews with academic and pharmaceutical industry participants, found that respondents were excited by the power of our technology, especially for use with fine needle aspirates and core biopsies. We found that there are many oncology sample access points, each with different pricing points. Based on a per sample price of thousands of dollars per sample, the immune profiling opportunity for Berkeley Lights could be hundreds of millions of dollars.

Synthetic biology market opportunity

According to BCC Research, the synthetic biology market had end-market sales of approximately $5 billion in 2019 and is expected to grow to $19 billion by 2024 at a 29% CAGR. In synthetic biology, participants design and build millions of different strains per year from organisms, such as bacteria or yeast, by altering their genetic code. They then functionally test these millions of cells with different genetic alterations to find the best cells that not only produce the desired product, such as secreted proteins, enzymes and strains applicable to food, flavors, fragrances and materials, but do so in an economically viable way.

Just as with cell line development in the antibody therapeutics market, cell productivity is measured by secretion, growth, response to changing media and other factors to select the best cells. Understanding the correlation of cell productivity to a full production scale fermenter early in the process directly impacts manufacturing costs and the profitability of the product. Once the desired productivity metric is achieved, our customers commence production of their target product.

The synthetic biology process is characterized by three key steps: design, build and test. These three steps are continuously iterated to drive feedback into the design for the next iteration until the desired result is achieved. Using conventional methods requires significant time and capital. We expect iterations that take weeks using conventional methods are likely to be able to be completed in days using our platform.

 

LOGO

 

127


Table of Contents

Synthetic biology discovery workflow opportunity

In line with our strategy of entering new markets through partnerships with established leaders, we demonstrated results from our Opto Plasma B Discovery 1.0 and Opto Cell Line Development 1.0 workflows to Ginkgo. In September of 2019, we signed the Ginkgo Agreement with aggregate payments to us over the term of the agreement of up to $150 million with Ginkgo. For more information regarding our collaboration with Ginkgo, please see “—Intellectual property—Licenses and collaboration—Ginkgo collaboration agreement.”

Under the Ginkgo Agreement, Ginkgo has agreed to integrate the Berkeley Lights Platform into its automated genetic engineering foundries. The collaboration will drive, among other things, jointly developed workflows with the aim of continued growth in output and efficiency of Ginkgo’s foundries while expanding our commercial workflow offering and growth in this market.

Unlike biopharmaceuticals, where the constraint is associated with expensive and long-lead times in pre-clinical and clinical work, most products in synthetic biology are, at this time, less regulated. The major constraint in this market is rapidly discovering economically viable strains that can produce the desired product specifications by design and at a level of efficiency to be cost competitive. Decreasing design, build and test cycle times while increasing correlation to large scale fermentation has a direct impact on the rate at which products can get to market and the manufacturer’s return on investment. Revenue opportunities for Berkeley Lights in synthetic biology are largely a function of new customers, number of organisms supported and overall number of products pursued by this industry.

Commercial

We commercially launched the Berkeley Lights Platform in December of 2016, which included Beacon and the alpha version of our Opto Cell Line Development 1.0 workflow targeting the antibody therapeutics market. From the initial launch of our platform through May 31, 2020, we have launched a total of six commercial workflows and, in June of 2019, we launched our desktop Lightning system targeting assay development and lower throughput workflows. Our current workflows target potential customers across the antibody therapeutics, cell therapy and synthetic biology markets. This potential customer base is primarily comprised of companies developing biotherapeutics. As of December 31, 2019, our customer base was comprised of 45 customers and included eight of the ten largest biopharmaceutical companies in the world ranked by 2019 revenue who comprised 18% of our revenue in 2019, as well as biotechnology companies, leading contract research organizations, synthetic biology companies and academic research institutions.

As of March 31, 2020, we employed a commercial team of 74 employees, including 24 with Ph.D. degrees and many with significant industry experience. Of the 74 commercial employees, 32 were in business development, sales and marketing, while 42 were employed within our customer success organization, which is focused primarily on customer service and support efforts. As of March 31, 2020, our commercial team included 17 quota carrying sales representatives. We follow a direct sales model in North America, certain regions in Europe and China, while also selling through third party distributors and dealers in Asia.

Our business model is focused on driving the adoption of the Berkeley Lights Platform and maximizing its use across our customers’ value chains. This is achieved by enabling more functional testing of single cells throughout our customers’ value chains and by finding opportunities for customers to perform single-cell functional testing earlier in their product development process. We engage with potential customers to identify a significant challenge they are facing and then evaluate which workflows and underlying assays can address their problem. Customers can gain access to our platform via direct purchase, subscription, or strategic partnership. In many cases we can address customer needs with existing or variants of existing workflows. Alternately, we may form strategic partnerships to develop substantially new workflows with our customers to

 

128


Table of Contents

address their needs. For the years ended December 31, 2018 and 2019, revenue was $21.2 million and $39.1 million from direct purchase (or 68% and 69%, respectively), respectively, none and $89,000 from subscription (or 0% for both periods), respectively, and $6.9 million and $9.6 million from strategic partnerships (or 22% and 17%, respectively), respectively. For the three months ended March 31, 2019 and 2020, revenue was $9.0 million and $9.4 million from direct purchase (or 71% and 69%, respectively), respectively, none and $55,000 from subscription (or 0% for both periods), respectively, and $2.3 million and $1.9 million from strategic partnerships (or 18% and 13%, respectively), respectively.

Competition

We face significant competition in the life sciences technology market. We currently compete with both established and early stage life sciences technology companies that design, manufacture and market systems, consumables, reagent kits and software for, among other applications, genomics, single-cell analysis, spatial analysis and immunology, and/or provide services related to the same. Growing understanding of the importance of single-cell information is leading to more companies offering services related to collecting such information. Our potential competitors include Danaher, Menarini Silicon Biosystems, Miltenyi Biotec and Sphere Fluidics Ltd., among others. Our target customers may also elect to develop their workflows on legacy systems, or using traditional methods, rather than implementing our platform and may decide to stop using our platform. In addition, there are many large established players in the life science technology market that we do not currently compete with but that could develop systems, tools or other products that will compete with us in the future. These large established companies have substantially greater financial and other resources than us, including larger research and development staff or more established marketing and sales forces.

For further discussion of the risks we face relating to competition, see the section titled “Risk factors—Risks related to our business and strategy—The life sciences technology market is highly competitive, and if we cannot compete successfully with our competitors, we may be unable to increase or sustain our revenue, or achieve and sustain profitability.”

Manufacturing and supply

We developed the Berkeley Lights Platform to create the most advanced environment for functional testing of single cells and provide customers local access to Digital Cell Biology for developing cell-based products on a global scale. Our platform is a fully integrated, end-to-end solution, comprised of our OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software. Our platform leverages our proprietary OptoElectro Positioning (OEP) technology, which provides deterministic positioning of live single cells and other micro-objects using light. We believe our platform delivers a high level of control over, and preservation of, live single cells or other micro-objects throughout the functional characterization process.

Our manufacturing strategy relies heavily on third parties. Manufacturing of our systems, reagent kits and OptoSelect chip components is contracted out to third party contract manufacturers and suppliers located in the United States, Europe and Asia. We perform final assembly of our OptoSelect chips in-house. Our outsourced production strategy is intended to drive cost leverage and scale and avoid the high capital outlays and fixed costs related to constructing and operating a manufacturing facility. Certain suppliers of our components and materials are single source suppliers. For further discussion of the risks relating to our third party suppliers, see the section titled “Risk factors—Risks related to manufacturing and supply.”

 

129


Table of Contents

Consumables—OptoSelect chips and reagent kits

We obtain all components of our OptoSelect chips from third party suppliers. While some components are sourced from a single supplier, we have qualified, or are qualifying, second sources for several of our critical chip requirements, as well as our reagent kits, and proprietary chip surface coatings. We believe that having dual sources for certain of our components helps reduce the risk of a potential production delay caused by a disruption in the supply of a critical component. We perform final manufacturing and assembly of our OptoSelect chips at our facilities in Emeryville, California. We outsource the manufacturing of many of our commercially released reagent kits to third party contract manufacturers.

Advanced automation systems

We rely heavily on third party contract manufacturers for production and manufacturing of Beacon, Lightning and Culture Station. Design work, prototyping and pilot manufacturing of our advanced automation systems are performed in-house before outsourcing to the third party contract manufacturers. We currently rely on Korvis LLC for the manufacturing of Beacon and Culture Station. For additional information on our supply arrangement with Korvis, see below under “Korvis supply agreement.”

Korvis supply agreement

In February of 2015, we entered into a supply agreement with Korvis LLC, or Korvis, which was subsequently amended in April of 2019, or the Korvis Agreement. The Korvis Agreement governs the terms and conditions of any purchase orders that we submit to Korvis for the manufacture of Beacon and Culture Station. Under the terms of the Korvis Agreement, Korvis will manufacture our products according to agreed-upon specifications. Korvis is required to maintain minimum manufacturing capacity of a specified number of Beacon systems per month. In addition, we may issue purchase orders in such volumes that require Korvis to maintain at least a specified minimum number of Beacon systems in its finished goods inventory. We are not otherwise obligated to issue a purchase order, and Korvis is only obligated to accept purchase orders for any specified number of products if the purchase order is consistent with a forecast and aligns with Korvis’s then-current lead times. The initial term of the Korvis Agreement was 24 months, after which the agreement automatically renews for successive 12-month terms unless we or Korvis provide written notice of intent not to renew at least 90 days’ prior to the end of the then-current term. Either we or Korvis may terminate the Korvis Agreement (i) upon a material breach of the agreement that is not cured with 30 days of the other party’s notice of such breach, (ii) upon the other party’s bankruptcy or insolvency, or (iii) if, for any given consecutive 120-day period, both parties do not have any purchase orders outstanding and there is no finished goods inventory of Beacon systems being maintained by Korvis.

The Korvis Agreement also includes negotiated provisions relating to, among others, delivery, inspection procedures, warranties, intellectual property rights, indemnification, and confidentiality.

Intellectual property

Protection of our intellectual property is fundamental to the long-term success of our business. We seek to ensure that investments made into the development of our technology are protected by relying on a combination of patent rights, trademarks, copyrights, trade secrets, including know-how, license agreements, confidentiality agreements and procedures, non-disclosure agreements with third parties, employee disclosure and invention assignment agreements and other contractual rights.

Our patent strategy is focused on seeking coverage for various elements of our Berkeley Lights Platform, including our OptoSelect chips and reagent kits, advanced automation systems, including Beacon, Lightning,

 

130


Table of Contents

and Culture Station and advanced workflow software. In addition, we file for patent protection on the certain therapeutic and diagnostic products and processes discovered using or derived from the Berkeley Lights Platform.

As of June 1, 2020, our owned patent assets included approximately 25 U.S. patents, 62 pending U.S. patent applications, 15 pending patent cooperation treaty, or PCT, applications, 116 foreign patents and 293 pending foreign patent applications in various foreign jurisdictions, including Australia, Canada, China, the European Union, Hong Kong, Israel, Japan, South Korea, Singapore and Taiwan. Our owned patent assets include 16 patents and applications that are jointly owned by us and by the UC Regents, including 2 U.S. patents, 1 pending U.S. patent application, 1 pending PCT application, 6 foreign patents and 6 foreign patent applications, of which the 2 U.S. patents, the 6 foreign patents and 2 of the foreign patents applications are included within the scope of our exclusive licensing arrangement with the UC Regents. As of June 1, 2020, our in-licensed patent assets included 9 U.S. patents, 1 foreign patent, 1 pending U.S. patent application, and 1 pending foreign patent application. Excluding any patent term extension, the currently issued BLI-owned patents are expected to expire between 2033 to 2038. The currently issued in-licensed patents are expected to expire from 2022 to 2032. We do not expect that the expiration of any patent in 2022 will materially impact our business, future operations or financial position.

Various of our owned patents and patent applications relate to our advanced automation systems, including our Beacon, Lightning and/or Culture Station systems and our OEP technology, other of our patents and patent applications relate to our advanced application and workflow software, including our CAS software, our Workflow Runner/Builder software, our Image Analyzer software, and/or our Assay Analyzer software, still other of our owned patents and patent applications relate to our OptoSelect chips, and still other of our owned patents and patent applications relate to our reagent kits and/or our workflows. Certain of our owned patents and patent applications relate to more than one product group or technology. Our in-licensed patents and patent applications generally relate to micro opto-fluidics. We also have patents related to products or technology that are under development or are on our development roadmap.

We also rely on copyrights, trade secrets, including know-how, unpatented technology and other proprietary information, to strengthen our competitive position. We have determined that certain technologies, such as

certain processes, methods and surface coatings, are better kept as trade secrets. To mitigate the chance of trade secret misappropriation, it is our policy to enter into nondisclosure and confidentiality agreements with parties who have access to trade secrets, such as our employees, collaborators, consultants, advisors and other third parties. We also enter into invention or patent assignment agreements with our employees and consultants that obligate them to assign to us any inventions they have developed while working for us.

We also seek to protect our brand through procurement of trademark rights. As of March 31, 2020, we own three registered trademarks in the U.S. and 16 registered trademarks internationally, as well as five U.S. and 30 international pending trademark applications. Such international jurisdictions in which we own registered trademarks or pending trademark applications include Australia, Canada, China, the European Union, Israel, Japan, South Korea and Singapore. Our registered trademarks and pending trademark applications include trademarks for Berkeley Lights, NanoPen, OptoSelect, Beacon, Lightning, and our Berkeley Lights logo. In order to supplement protection of our brand, we have also registered several internet domain names.

Licenses and collaborations

UC Regents license agreement

In October of 2011, we entered into a license agreement, which was subsequently amended in March 2016, or the UC Agreement, with The Regents of the University of California, or the UC Regents, pursuant to which UC

 

131


Table of Contents

Regents granted us an exclusive (subject to certain non-commercial rights reserved by UC Regents and certain rights retained by the U.S. government, including so-called march-in rights), sublicensable, worldwide license under certain patent rights owned by UC Regents related to optoelectronic tweezer technology to develop, manufacture, use and commercialize products, services and methods that are covered by such patent rights, or the Licensed Products.

We paid UC Regents upfront payments totaling $15,000 in connection with executing the UC Agreement. In addition, we issued an aggregate of 250,992 shares of our common stock, which had an aggregate fair value at the time of issuance of approximately $30,000, to certain persons associated with UC Regents upon the occurrence of a qualifying financing event. Additionally, we must pay UC Regents a sub-single digit percentage royalty on our net sales of Licensed Products that are covered by a valid claim of the licensed patents, subject to an annual minimum royalty payment owed to UC Regents of $10,000. We are also obligated to pay UC Regents a percentage of certain royalty income received from our sublicensees ranging from the low- to mid-teens.

We are obligated to use commercially reasonable efforts to develop, manufacture and commercialize the Licensed Products.

The UC Agreement will continue until the expiration of the last to expire patent or last to be abandoned patent application that is licensed to us, unless terminated earlier in accordance with the terms of the UC Agreement. We may terminate the UC Agreement by providing advance written notice as specified in the UC Agreement. UC Regents may terminate the UC Agreement if we violate or fail to perform any term of the UC Agreement and we fail to cure such violation or failure within 90 days of notice thereof from UC Regents. Additionally, if we challenge the validity or enforceability of any of the licensed patents, UC Regents may remove such patents from the scope of our license.

Ginkgo collaboration agreement

In September of 2019, we entered into the Ginkgo Agreement with Ginkgo to collaborate on developing and deploying workflows on Beacon and Lightning, or the Berkeley Lights Systems, to accelerate the engineering of microbial organisms and mammalian cell lines, and pursuant to which Ginkgo will purchase from us the Berkeley Lights Systems and related consumables and support services on the terms and conditions set forth in the Ginkgo Agreement.

We and Ginkgo must use diligent efforts to perform our respective obligations under the Ginkgo Agreement, including with respect to our collaborative development of workflows for the Berkeley Lights Systems. Such initial development of workflows will be focused on yeast and mammalian cells, subject to the requirements specified in the Ginkgo Agreement. We and Ginkgo may also collaboratively develop additional workflows during the term of the Ginkgo Agreement, subject to the terms of the Ginkgo Agreement. The collaborative development of such workflows under the Ginkgo Agreement will be conducted by us and Ginkgo as set forth in workflow development plans drafted by the parties and approved by a joint review committee comprised of two (2) representatives of Ginkgo and two (2) of our representatives. Such joint review committee will oversee and make certain decisions regarding such collaborative development of workflows under the Ginkgo Agreement as set forth therein.

Pursuant to the Ginkgo Agreement, we received an upfront payment of $10.0 million, and such amount is fully creditable against certain other payments owed by Ginkgo to us during the term of the Ginkgo Agreement. Additionally, Ginkgo is obligated to pay us at least $109.0 million, and up to $150.0 million, over the term of the Ginkgo Agreement, such payments to us being comprised of (1) payments for our efforts under the workflow development plans and (2) payments for purchases of the Berkeley Lights Systems, associated consumables,

 

132


Table of Contents

related support services, annual license use fees, and certain other payments. Ginkgo has the right to pre-pay and buy down the remainder of such purchasing obligations, such right, the Buy-Down Right. We are also entitled to receive potential development and regulatory milestone payments, to the extent Ginkgo receives the same from a third party, of up to an aggregate of $11.5 million for each applicable antibody therapeutic product in the event that Ginkgo uses certain of our propriety workflows to conduct commercial services for a third party and such services results in the discovery of an antibody to be used as the active ingredient in a therapeutic product in connection with the development of such antibody therapeutic product.

Unless terminated earlier, or extended, in accordance with its terms, the Ginkgo Agreement will continue until the seventh anniversary of the effective date, subject to certain automatic extensions, including for our failure to supply. The Ginkgo Agreement will automatically terminate if Ginkgo, at any time after the second year of the Ginkgo Agreement term, elects to exercise its Buy-Down Right. In addition, either party may terminate the Ginkgo Agreement (1) for the material breach by the other party (including, with respect to us, a material supply failure), (2) upon the occurrence of certain insolvency related events of the other party, and (3) for certain force majeure events.

Government regulations

Our products and operations may be subject to extensive and rigorous regulation by the FDA and other federal, state, or local authorities, as well as foreign regulatory authorities. The FDA regulates, among other things, the research, development, testing, manufacturing, clearance, approval, labeling, storage, recordkeeping, advertising, promotion, marketing, distribution, post-market monitoring and reporting, and import and export of medical devices. Our products are currently marketed as research use only, or RUO.

RUO products cannot make any claims related to safety, effectiveness or diagnostic utility and they cannot be intended for human clinical diagnostic use. In November 2013, the FDA issued a final guidance on products labeled RUO, which, among other things, reaffirmed that a company may not make any clinical or diagnostic claims about an RUO product. The FDA will also evaluate the totality of the circumstances to determine if the product is intended for diagnostic purposes. If the FDA were to determine, based on the totality of circumstances, that our products labeled and marketed for RUO are intended for diagnostic purposes, they would be considered medical devices that will require clearance or approval prior to commercialization.

Regulatory framework for medical devices in the United States

Pursuant to its authority under the Federal Food, Drug and Cosmetic Act, or the FDCA, the FDA has jurisdiction over medical devices, which are defined to include, among other things, in vitro diagnostic devices, or IVDs. IVDs that are marketed for RUO are not intended for use in a clinical investigation or for clinical diagnostic use outside an investigation and must be labeled “For Research Use Only. Not for use in diagnostic procedures.” Products that are intended for RUO and are properly labeled as RUO are exempt from compliance with the FDA’s requirements applicable to medical devices more generally, including the requirements for clearance or approval and compliance with manufacturing requirements known as the Quality System Regulation, or QSR. A product labeled RUO but intended to be used diagnostically may be viewed by the FDA as adulterated and misbranded under the FDCA and is subject to FDA enforcement activities. The FDA may consider the totality of the circumstances surrounding distribution and use of an RUO product, including how the product is marketed, when determining its intended use.

Although we currently market our products as RUO, we may in the future intend for them to be used for clinical or diagnostic purposes, or may develop other different products intended for clinical or diagnostic purposes, which would result in the application of a more onerous set of regulatory requirements. Specifically, unless an

 

133


Table of Contents

exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a premarket notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDCA, also referred to as a 510(k) clearance, or approval from the FDA of an application for premarket approval, or PMA. Both the 510(k) clearance and PMA processes can be resource intensive, expensive and lengthy, and require payment of significant user fees.

Under the FDCA, medical devices are classified into one of three classes—Class I, Class II or Class III—depending on the degree of risk associated with each medical device and the extent of control needed to provide reasonable assurances with respect to safety and effectiveness.

Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be reasonably assured by adherence to a set of FDA regulations, referred to as the General Controls for Medical Devices, which require compliance with the applicable portions of the QSR facility registration and product listing, reporting of adverse events and malfunctions, and appropriate, truthful and non-misleading labeling and promotional materials. Some Class I devices also require premarket clearance by the FDA through the 510(k) premarket notification process described below. Most Class I products are exempt from the premarket notification requirements.

Class II devices are those that are subject to the General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, patient registries, FDA guidance documents and post-market surveillance. Most Class II devices are subject to premarket review and clearance by the FDA. Premarket review and clearance by the FDA for Class II devices is accomplished through the 510(k) premarket notification process.

Class III devices include devices deemed by the FDA to pose the greatest risk such as life-supporting or life-sustaining devices, or implantable devices, in addition to those deemed novel and not substantially equivalent following the 510(k) process. The safety and effectiveness of Class III devices cannot be reasonably assured solely by the General Controls and Special Controls described above. Therefore, these devices are subject to the PMA application process, which is generally more costly and time-consuming than the 510(k) process. Through the PMA application process, the applicant must submit data and information demonstrating reasonable assurance of the safety and effectiveness of the device for its intended use to the FDA’s satisfaction. Accordingly, a PMA typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, manufacturing information, labeling and financial disclosure information for the clinical investigators in device studies. The PMA application must provide valid scientific evidence that demonstrates to the FDA’s satisfaction a reasonable assurance of the safety and effectiveness of the device for its intended use.

After a device enters commercial distribution, numerous regulatory requirements continue to apply. These include:

 

 

the FDA’s QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier/contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process;

 

 

labeling regulations, unique device identification requirements and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label uses;

 

 

advertising and promotion requirements;

 

 

restrictions on sale, distribution or use of a device;

 

 

PMA annual reporting requirements;

 

134


Table of Contents
 

PMA approval of product modifications, or the potential for new 510(k) clearances for certain modifications to 510(k)-cleared devices;

 

 

medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur;

 

 

medical device correction and removal reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;

 

 

recall requirements, including a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death;

 

 

an order of repair, replacement or refund;

 

 

device tracking requirements; and

 

 

post-market surveillance regulations, which apply when necessary to protect the public health or to provide additional safety and effectiveness data for the device.

The FDA has broad post-market and regulatory enforcement powers. Medical device manufacturers are subject to unannounced inspections by the FDA and other state, local and foreign regulatory authorities to assess compliance with the QSR and other applicable regulations, and these inspections may include the manufacturing facilities of any suppliers. Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include sanctions such as: warning letters, fines, injunctions, consent decrees and civil penalties; unanticipated expenditures, repair, replacement, refunds, recall or seizure of our products; operating restrictions, partial suspension or total shutdown of production; the FDA’s refusal of our requests for 510(k) clearance or premarket approval of new products, new intended uses or modifications to existing products; the FDA’s refusal to issue certificates to foreign governments needed to export products for sale in other countries; and withdrawing 510(k) clearance or premarket approvals that have already been granted and criminal prosecution.

It is also possible that in the future we develop a therapeutic that would be subject to different but also comprehensive FDA regulatory requirements.

Employees

As of March 31, 2020, we had 210 full-time employees, with 88 in research and development, 74 in business development, sales, marketing and support, 21 in manufacturing and operations and 27 in general and administrative functions. None of our employees is represented by a labor union with respect to his or her employment with us. We consider our relationship with our employees to be good.

Facilities

Our corporate headquarters are located in Emeryville, California, where we lease and occupy approximately 54,063 square feet of space. We currently sublease 5,400 square feet of the space we occupy at our corporate headquarters pursuant to a sublease that expires in February 2022. On June 25, 2020, we entered into an operating lease for 34,789 square feet of additional space in Emeryville, California, as well as amended our existing lease arrangements to vacate certain existing space and extend the terms of our remaining existing space in Emeryville. The lease for additional space commences October 1, 2020 and all of the leases now expire on March 31, 2028. We believe that such facilities meet our current and future anticipated needs.

 

135


Table of Contents

Legal proceedings

We are and may from time to time become involved in litigation or other legal proceedings.

On July 9, 2020, AbCellera Biologics Inc., or AbCellera, filed a complaint in the United States District Court for the District of Delaware, alleging that we have infringed and continue to infringe, directly and indirectly, the following patents exclusively licensed by AbCellera by making, using, offering for sale, selling and/or importing our Beacon and Culture Station systems and the OptoSelect chips, and our sale of the Opto Plasma B Discovery Workflow: U.S. Patent Nos. 10,107,812, 10,274,494, 10,466,241, 10,578,618, 10,697,962, 10,087,408,10,421,936 and 10,704,018. AbCellera is seeking, among other things, judgment of infringement, a permanent injunction and damages (including treble damages for willful infringement). We believe that the patent assertions by AbCellera are without merit and we intend to vigorously defend ourselves against this action. An adverse determination in this litigation could subject us to significant liabilities, require us to seek licenses from or pay royalties to AbCellera or prevent us from manufacturing, selling or using certain of our products, any of which could have a material adverse effect on our business.

We are not currently a party to any other litigation or legal proceedings that, in the opinion of our management, could have a material adverse effect on our business, financial condition, results of operations or prospects. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

 

136


Table of Contents

Management

Executive officers and directors

The following table sets forth information regarding our current executive officers and directors as of July 13, 2020:

 

     
Name    Age    Position(s)

Executive officers and employee director

     

Eric D. Hobbs, Ph.D.

   43    Chief Executive Officer and Director

Shaun M. Holt

   42    Chief Financial Officer

Keith J. Breinlinger, Ph.D.

   46    Chief Technology Officer

Stuart L. Merkadeau

   59    General Counsel

Non-employee directors

     

Sarah Boyce

   48    Director

Igor Khandros, Ph.D.

   65    Director

Gregory Lucier

   56    Director

Michael Marks

   69    Director

Michael Moritz

   65    Director

Elizabeth Nelson

   59    Director

James Rothman, Ph.D.

   69    Director

Ming Wu, Ph.D.

   59    Director

Makoto Shintani

   70    Director

 

Executive officers and employee director

Eric D. Hobbs, Ph.D. has served as a member of our board of directors and as our Chief Executive Officer since March 2017. Previously, Dr. Hobbs served as our Senior Vice President, Operations and Consumables, from March 2016 to March 2017, as our Vice President, Operations and Consumables, from February 2015 to March 2016, and as Senior Director, Research and Development, from May 2013 until February 2015. Prior to Berkeley Lights, Dr. Hobbs held roles of increasing responsibility at FormFactor Inc., or FormFactor, a publicly-traded semiconductor technology company, serving most recently as Senior Director of Product Management. Dr. Hobbs received his B.A. in Liberal Arts, with minors in Mathematics and Physics from Saint Mary’s College of California, his B.S. in Mechanical Engineering from the University of Southern California, and his M.S. and Ph.D. in Mechanical Engineering, Microelectromechanical Systems, from the University of California, Berkeley. We believe Dr. Hobbs is qualified to serve on our board of directors due to his experience as our Chief Executive Officer and his educational background.

Shaun M. Holt has served as our Chief Financial Officer since March 2016. Previously, Mr. Holt served as our Vice President, Head of Finance and Accounting from November 2015 to March 2016. Mr. Holt previously served in a variety of finance leadership roles at Illumina, Inc., a publicly traded life sciences analytics company, from July 2008 until November 2015, including Senior Director, Head of Finance, Global Business Units and Research

 

137


Table of Contents

and Development, Finance Director, Head of EMEA Finance & Accounting, and Head of Commercial Financial Planning and Analysis. Mr. Holt also previously served as Manager of Financial Planning and Analysis at Websense, Inc. from June 2005 until July 2008. Mr. Holt was a Senior Financial Analyst at Kyocera Communications, Inc. from 2004 to 2005, and Cost Accountant, Cost Analyst and Financial Analyst at Macromedia, Inc. from 2001 to 2004. Mr. Holt received his B.B.A. in Finance from California State University, Stanislaus.

Keith J. Breinlinger, Ph.D. has served as our Chief Technology Officer since March 2013. Previously, Dr. Breinlinger was a Product and System Architect at FormFactor from July 2005 until March 2013, and a Mechanical Architect at Teradyne from 1996 to 2005. From 1993 until 1995, Dr. Breinlinger was a Mechanical Designer at iRobot. Dr. Breinlinger received his B.S., M.S. and Ph.D. in Mechanical Engineering from the Massachusetts Institute of Technology.

Stuart L. Merkadeau has served as our General Counsel since June 2015. Mr. Merkadeau previously served as Senior Vice President, General Counsel and Corporate Secretary of FormFactor from October 2002 until May 2015, and as Vice President, Intellectual Property of FormFactor from July 2000 to September 2002. Prior to this, Mr. Merkadeau was a partner at Graham & James LLP, a private law firm, where he oversaw a variety of licensing, corporate, and litigation matters across a broad range of technologies. Mr. Merkadeau received his B.S. in Industrial Engineering from Northwestern University and his J.D. from the University of California, Los Angeles School of Law. He is admitted to practice law in California and is registered before the U.S. Patent and Trademark Office.

Non-employee directors

Sarah Boyce has served as a member of our board of directors since August 2019. Ms. Boyce has served as President and Chief Executive Officer of Avidity Biosciences LLC, a privately-held biotechnology company, since October 2019. Previously, Ms. Boyce served as the President and served on the board of directors of Akcea Therapeutics, Inc., a publicly-traded biopharmaceutical company, from April 2018 to September 2019. Before that, Ms. Boyce was the Chief Business Officer of Ionis Pharmaceuticals, Inc., a publicly-traded biotechnology company, from January 2015 to April 2018. Prior to joining Ionis, Ms. Boyce was Vice President, Head of International Business Strategy and Operations at Forest Laboratories, Inc., a publicly-traded pharmaceutical company that was acquired by Actavis Pharma, Inc. from 2012 to 2014. She was Vice President, Global Head Nephrology Therapeutics Area of Alexion Pharmaceuticals Inc., a publicly-traded pharmaceutical company, from 2010 to 2011. She held various positions at Novartis Group AG, a publicly-traded Swiss healthcare company, including Vice President, Global Program Head, Pediatric and Specialty from 2000 to 2010. Ms. Boyce currently serves on the board of directors of Avidity Biosciences LLC, a privately-held biotechnology company and Ligand Pharmaceuticals Incorporated, a publicly-traded biopharmaceutical company. Ms. Boyce received her B.S. in Microbiology from the University of Manchester, England. We believe Ms. Boyce is qualified to serve on our board of directors due to her extensive experience as an executive and director of public and private companies in the biotechnology industry.

Igor Khandros, Ph.D. has served as a member of our board of directors since 2011. Dr. Khandros has served as Chief Executive Officer of Nutcracker Therapeutics, Inc., a privately-held biotechnology company, since October 2017. Dr. Khandros is one of our Co-Founders and, from 2011 to March 2017, served as our Chief Executive Officer. Previously, Dr. Khandros founded and served on the boards of directors of two publicly-traded companies, FormFactor and Tessera Technologies, Inc., a technology licensing company. Dr. Khandros received an M.S.-equivalent degree in Metallurgical Engineering from Kiev Polytechnic Institute in Kiev, Ukraine, and a Ph.D. in Metallurgy from Stevens Institute of Technology. We believe Dr. Khandros is qualified to serve on our board of directors due to his educational background, his experience as a founder and former executive of our

 

138


Table of Contents

Company and his extensive experience as a founder, executive and board member at other public and private technology companies.

Gregory Lucier has served as a member of our board of directors since June 2020. Mr. Lucier has served as the Chief Executive Officer of Corza Health, Inc., a privately-held company focused on acquiring companies and assets as part of a strategy to build a market-leading healthcare business, since April 2019. Prior to that, he served as Chief Executive Officer of NuVasive, Inc., a publicly-traded medical device company, from June 2015 to December 2018. Before joining Nuvasive, Mr. Lucier was Chairman and Chief Executive Officer of Life Technologies Corporation (formerly Invitrogen Corporation), a publicly-traded global biotechnology company, from May 2003 until it was acquired by Thermo Fisher Scientific Inc. in February 2014. Prior to that, Mr. Lucier was a corporate officer at General Electric Company, where he served in a variety of leadership roles. Mr. Lucier is Chairman of the boards of directors of Nuvasive, Inc., a publicly traded medical device company, and Epic Sciences, a privately-held biotechnology company, and has served as a director of Catalent, Inc., a publicly-traded pharmaceutical company, since April 2015, and previously served on the boards of directors of Life Technologies Corporation from May 2003 to February 2014, of CareFusion Corporation, a publicly-traded medical device company, from August 2009 until its sale to Becton Dickinson in March 2015, and of Invuity, Inc. from October 2014 until its sale to Stryker in October 2018. Mr. Lucier received his B.S. in Industrial Engineering from Pennsylvania State University and his M.B.A. from Harvard Business School. We believe Mr. Lucier is qualified to serve on our board of directors due to his experience as an executive and director at medical device and life sciences companies.

Michael Marks has served as a member of our board of directors since April 2014. Mr. Marks has served as Founding Managing Partner of WRVI Capital, a technology venture capital fund, since 2014, as Founding Managing Partner of WRV Capital, a technology venture capital fund, since 2014 and as Chief Executive Officer, Chairman and Founder of Katerra, Inc., or Katerra, a technology company, since March 2015. Previously, Mr. Marks served as a founding partner of Paxion Capital, a private partnership, from March 2015 until March 2020, was a Founding Partner of Riverwood Capital, a private equity firm, from March 2007 until May 2019 and a Partner and Senior Advisor at Kohlberg Kravis Roberts & Co., a private equity firm, from 2006 to 2007. Prior to these roles, Mr. Marks served as Chief Executive Officer of Flextronics from 1994 until 2006 and as member of its board of directors from 1994 to 2007. Mr. Marks currently serves on the board of directors of several companies, including Katerra, Lolli & Pops, a privately-held candy manufacturing company, Bossa Nova, a privately-held robotics company, The Melt, a restaurant chain and H2O.ai, a software company. Mr. Marks previously served on the board of directors of publicly-traded companies, Schlumberger Limited, an oilfield services company, from January 2015 to July 2019, GoPro, Inc., a technology company from February 2011 to April 2017 and SanDisk Corporation, a manufacturer of flash memory products from 2003 to September 2016. Mr. Marks received his B.A. and M.A. in Psychology from Oberlin College and his M.B.A. from Harvard Business School. We believe Mr. Marks is qualified to serve on our board of directors due to his extensive experience as chief executive officer and member of the boards of directors of numerous companies, his expertise in financial and accounting matters and his investment experience.

Michael Moritz has served as a member of our board of directors since April 2015. Mr. Moritz has been a Managing Partner of Sequoia Capital, a venture capital fund, since 1986. Mr. Moritz currently serves on the board of directors of numerous private companies, including Stripe, Inc., a financial technology company, Instacart, a grocery delivery technology company, Charlotte Tilbury, a cosmetics company, GameFly, a technology company, Klarna, a financial technology company, and Group Nine Media, a digital media company. Previously, Mr. Moritz served on the board of directors of LinkedIn Corporation, a publicly-traded professional networking company, from 2011 to June 2016 and Green Dot Corporation, a publicly-traded financial technology company, from 2003 to May 2016. Mr. Moritz received his M.A. in History from Christ Church, Oxford. We believe Mr. Moritz is qualified to serve on our board of directors due to his background in and over 25 years’

 

139


Table of Contents

experience with the venture capital industry, providing guidance and counsel to a range of internet and technology companies, and service on the boards of directors of various private and public companies.

Elizabeth Nelson has served as a member of our board of directors since September 2019. Since 2006, Ms. Nelson has served as principal of equusventures, an investment fund that she founded. From 1996 until 2005, Ms. Nelson served as the Executive Vice President and Chief Financial Officer of Macromedia, Inc., software development company, where she also served as a director from January 2005 to December 2005. Ms. Nelson currently serves on the board of directors of Nokia Corporation, a Finnish publicly-traded telecommunications company, since July 2012, Upwork Inc., a publicly-traded technology company, since April 2015, and several private companies, including DAI Global, Noodle.ai and Smule. Previously, Ms. Nelson served on the board of directors of Zendesk, Inc., a publicly-traded software company, from July 2012 to May 2019, and Pandora Media, Inc., a music and software company, from July 2013 to June 2017. Ms. Nelson received her B.S. in Foreign Service from Georgetown University and her M.B.A. in Finance from the Wharton School at the University of Pennsylvania. We believe that Ms. Nelson is qualified to serve on our board of directors due to her financial, accounting and operational experience from prior experience as an executive and director for various private and public technology companies.

James Rothman, Ph.D. has served as a member of our board of directors since May 2016. Dr. Rothman has been a faculty member at Yale University since 2008, where he serves as the Sterling Professor of Cell Biology, Chairman of the Yale School of Medicine’s Department of Cell Biology and is the Director and founder of the Nanobiology Institute. Dr. Rothman served as Chief Scientific Officer of GE Healthcare, from 2001 to 2013. Previously, Dr. Rothman founded and chaired the Department of Cellular Biochemistry and Biophysics at Memorial Sloan-Kettering Cancer Center from 1991 until 2004, where he held the Paul A. Marks Chair and served as Vice-Chairman. Previously, Dr. Rothman was the Wu Professor of Chemical Biology in the Department of Physiology and Cellular Biophysics at Columbia University and Director of Columbia University’s Sulzberger Genome Center, from 2004 to 2008. Dr. Rothman was awarded the 2013 Nobel Prize in Physiology or Medicine, for his work on vesicle trafficking. Dr. Rothman currently serves on the boards of directors for various private biotechnology companies. Dr. Rothman received his B.A. in Physics from Yale College and his Ph.D. in Biochemistry from Harvard University. We believe that Dr. Rothman is qualified to serve on our board of directors due to his educational background and extensive experience in biochemistry and cell biology, as well as his experience as an executive of healthcare and biotechnology companies.

Ming Wu, Ph.D. is one of our Co-Founders and has served as a member of our board of directors since 2011. Dr. Wu currently serves as the Nortel Distinguished Professor of Electrical Engineering and Computer Sciences at the University of California, Berkeley, and Co-Director of Berkeley Sensor and Actuator Center, and has been a faculty member at the University of California, Berkeley since 2004. In 1997, Dr. Wu co-founded a company that commercialized micro-electro-mechanical system optical switches. Dr. Wu was a professor in the electrical engineering department at the University of California, Los Angeles from 1992 to 2004, and was a member of the technical staff at AT&T Bell Laboratories, an industrial research and scientific development company, from 1988 to 1992. Dr. Wu received his B.S. in Electrical Engineering from National Taiwan University and Ph.D. in Electrical Engineering from the University of California, Berkeley. Dr. Wu has notified us of his resignation from our board of directors, effective upon the effectiveness of the registration statement to which this prospectus relates. Following his resignation, Dr. Wu has agreed to join our Strategic / Scientific Advisory Board.

Makoto Shintani has served as a member of our board of directors since May 2018. Mr. Shintani currently serves as a Senior Fellow of the Healthcare Business Unit of Nikon Corporation, a Japanese publicly-traded corporation specializing in optics and imaging products, and previously served as Corporate Vice President and Deputy General Manager from April 2015 until March 2019. From January 2007 to March 2011, Mr. Shintani served as a member of the board of directors of IS Japan and as a member of the board of directors and Chief Executive Officer of Irvine Scientific Sales. Mr. Shintani previously served on the board of directors of Beckman

 

140


Table of Contents

Coulter Life Sciences Japan, a privately-held healthcare company, from December 2013 to February 2015. Mr. Shintani received his B.S. in Biochemistry and Microbiology from the University of Tokyo, and subsequently served as an International Fellow of SRI International. Mr. Shintani has notified us of his resignation from our board of directors, effective upon the closing of this offering.

Family relationships

There are no family relationships among any of our directors or executive officers.

Board composition

The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management. Our board of directors meets on a regular basis and additionally as required. Our board of directors currently consists of ten directors, however the size of our board will be reduced to eight directors in connection with the resignations of Dr. Wu and Mr. Shintani.

Voting arrangements

The members of our board of directors were elected in compliance with the provisions of our restated certificate of incorporation and a voting agreement among certain of our stockholders. Pursuant to these provisions, the holders of our Series A, Series A-1 and Series A-2 convertible preferred stock, voting together as a single class, have the right to elect two directors to our board of directors, the holders of our Series B convertible preferred stock, voting as a separate class, have the right to elect one director to our board of directors, the holders of our Series C convertible preferred stock, voting as a separate class, have the right to elect two directors to our board of directors, the holders of our Series E convertible preferred stock, voting as a separate class, have the right to elect one director to our board of directors, the holders of our common stock, voting as a separate class, have the right to elect one director to our board of directors, and the holders of our common stock and our convertible preferred stock, voting together as a single class, have the right to elect the balance of the total number of our directors, which are designated as follows:

 

 

two members designated by the holders of a majority of our Series A, Series A-1 and Series A-2 convertible preferred stock, voting together as a single class, for which Dr. Wu and Dr. Khandros have been designated;

 

 

one member designated by the holders of a majority of our Series B convertible preferred stock, voting as a separate class, for which Ms. Nelson has been designated;

 

 

two members designated by the holders of a majority of our Series C convertible preferred stock, voting as a separate class, for which Messrs. Marks and Moritz have been designated;

 

 

one member designated by the holders of a majority of our Series E convertible preferred stock, voting as a separate class, for which Mr. Shintani has been designated;

 

 

one member elected by the holders of a majority of the shares of our common stock, voting as a separate class, who shall be our then-serving Chief Executive Officer, for which Dr. Hobbs has been designated;

 

 

two members designated by the holders of a majority of our common stock and convertible preferred stock, voting together as a single class, for which Dr. Rothman and Mr. Lucier have been designated; and

 

 

one member designated by the holders of a majority of our voting stock, together as a single class, for which Ms. Boyce has been designated.

The provisions of our restated certificate of incorporate and voting agreement relating to the selection of our directors will terminate in connection with this offering.

 

141


Table of Contents

Classified board of directors

In accordance with our amended and restated certificate of incorporation that will go into effect upon the completion of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the completion of this offering, our directors will be divided among the three classes as follows:

 

 

the Class I directors will be Mr. Lucier and Ms. Nelson, and their terms will expire at our first annual meeting of stockholders following this offering;

 

 

the Class II directors will be Ms. Boyce, Dr. Khandros and Mr. Moritz, and their terms will expire at our second annual meeting of stockholders following this offering; and

 

 

the Class III directors will be Dr. Hobbs, Mr. Marks and Dr. Rothman, and their terms will be expire at our third annual meeting of stockholders following this offering.

Our amended and restated certificate of incorporation and amended and restated bylaws that will go into effect upon the completion of this offering will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company. Our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of our outstanding voting stock entitled to vote in the election of directors.

Director independence

Upon the completion of this offering, we anticipate that our common stock will be listed on the Nasdaq Global Market. Under the listing requirements and rules of the Nasdaq Global Market, independent directors must compose a majority of a listed company’s board of directors within 12 months after its initial public offering. In addition, the rules of the Nasdaq Global Market require that, subject to specified exceptions and phase in periods following its initial public offering, each member of a listed company’s audit and compensation, nominating and governance committee be independent. Audit committee members must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act, or Rule 10A-3. Under the rules of the Nasdaq Global Market, a director will only qualify as an “independent director” if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

To be considered to be independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of our audit committee, our board of directors or any other board committee: (1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (2) be an affiliated person of the listed company or any of its subsidiaries.

Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that none of our directors, other than Drs. Hobbs and Rothman, has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and

 

142


Table of Contents

regulations of the listing requirements and rules of the Nasdaq Global Market. Dr. Hobbs is not considered independent because he is an employee of Berkeley Lights. Dr. Rothman is not considered independent because he received compensation in excess of $120,000 during each of the preceding three years pursuant to our strategic/scientific advisor consulting agreement with him. In making this determination, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Our board of directors also determined that Ms. Boyce, Ms. Nelson and Mr. Marks, the members of our audit committee, upon the completion of this offering, satisfy the independence standards for the audit committee established by applicable rules of the SEC, and the listing standards of the Nasdaq Global Market and Rule 10A-3.

Our board of directors has determined that Mr. Lucier, Mr. Moritz and Ms. Nelson the members of our compensation committee, upon the completion of this offering, are “non-employee directors” as that term is defined in Rule 16b-3 under the Exchange Act.

Each member of the nominating and corporate governance committee is independent within the meaning of the applicable listing standards, is a non-employee director and is free from any relationship that would interfere with the exercise of his or her independent judgment.

Board committees

Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee. Our board of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit committee

Our audit committee consists of Ms. Boyce, Mr. Marks and Ms. Nelson. The chair of our audit committee is Ms. Nelson, whom our board of directors has determined is an “audit committee financial expert” as that term is defined under the SEC rules implementing Section 407 of the Sarbanes-Oxley Act of 2002, and possesses financial sophistication, as defined under the listing standards of the Nasdaq Global Market. Our board of directors has also determined that each member of our audit committee can read and understand fundamental financial statements in accordance with applicable requirements. In arriving at these determinations, the board of directors has examined each audit committee member’s scope of experience and the nature of their experience in the corporate finance sector.

The responsibilities of our audit committee include:

 

 

appointing, approving the compensation of and assessing the independence of our independent registered public accounting firm;

 

 

overseeing the work of our independent registered public accounting firm, including through the receipt and consideration of reports from such firm;

 

 

reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures;

 

 

monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;

 

143


Table of Contents
 

discussing our risk management policies;

 

 

reviewing and approving or ratifying any related person transactions; and

 

 

preparing the audit committee report required by SEC rules.

Compensation committee

Our compensation committee consists of Mr. Lucier, Mr. Moritz and Ms. Nelson. The chair of our compensation committee is Mr. Lucier.

The responsibilities of our compensation committee include:

 

 

reviewing and approving, or recommending that our board of directors approve, the compensation of our chief executive officer and our other executive officers;

 

 

reviewing and recommending to our board of directors the compensation of our directors;

 

 

selecting independent compensation consultants and advisors and assessing whether there are any conflicts of interest with any of the committees compensation advisors; and

 

 

reviewing and approving, or recommending that our board of directors approve, incentive compensation and equity plans.

Nominating and corporate governance committee

Our nominating and corporate governance committee consists of Dr. Khandros, Mr. Lucier and Mr. Moritz. The chair of our nominating and corporate governance committee is Mr. Lucier.

The responsibilities of our nominating and corporate governance committee include:

 

 

identifying individuals qualified to become board members;

 

 

recommending to our board the persons to be nominated for election as directors and to each of the board’s committees;

 

 

reviewing and making recommendations to the board with respect to management succession planning;

 

 

developing and recommending to the board corporate governance principles; and

 

 

overseeing a periodic evaluation of the board.

Role of the board in risk oversight

The audit committee of the board of directors is primarily responsible for overseeing our risk management processes on behalf of the board of directors. Going forward, we expect that the audit committee will receive reports from management on at least a quarterly basis regarding our assessment of risks. In addition, the audit committee reports regularly to the board of directors, which also considers our risk profile. The audit committee and the board of directors focus on the most significant risks we face and our general risk management strategies. While the board of directors oversees our risk management, management is responsible for day-to-day risk management processes. Our board of directors expects management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies

 

144


Table of Contents

adopted by the audit committee and the board of directors. We believe this division of responsibilities is the most effective approach for addressing the risks we face and that our board of directors’ leadership structure, which also emphasizes the independence of the board of directors in its oversight of its business and affairs, supports this approach.

Risk considerations in our compensation program

We intend to conduct assessments of our compensation policies and practices for our employees to determine whether those policies and practices are reasonably likely to have a material adverse effect on us.

Code of business conduct and ethics

We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Upon completion of this offering, our code of business conduct and ethics will be available under the Corporate Governance section of our website at www.berkeleylights.com. In addition, we intend to post on our website all disclosures that are required by law or the listing standards of the Nasdaq Global Market concerning any amendments to, or waivers from, any provision of the code. The reference to our website address does not constitute incorporation by reference of the information contained at or available through our website, and you should not consider it to be a part of this prospectus.

Compensation committee interlocks and insider participation

None of the members of our compensation committee is currently or has ever been our officer or employee. None of our executive officers serves, or has served during the last fiscal year, as a member of the board of directors, compensation committee or other board committee performing equivalent functions, of any entity that has one or more executive officers serving as one of our directors or on our compensation committee.

Director compensation

Historically, we have not had a formalized non-employee director compensation program. Our non-employee directors did not receive any cash consideration for their service in fiscal year 2019. In September 2019, we granted each of Ms. Boyce and Ms. Nelson an option to purchase 100,000 and 157,500 shares of our common stock, respectively, each with an exercise price per share equal to fair market value on the date of grant. The options are early exercisable in exchange for restricted stock and vest as to 1/48th of on each monthly anniversary of August 8, 2019, subject to the holder’s continued service through each applicable vesting date. Ms. Nelson early-exercised 46,719 unvested stock options subject to her award in fiscal 2019 and received a restricted stock award for shares our common stock, subject to our right of repurchase in the event that Ms. Nelson’s service with us terminates for any reason. Dr. Rothman received certain additional compensation for his participation on our Strategic Scientific Advisory Board and advice concerning research and development activities during 2019 in the aggregate amount of $250,000. In June 2016, we adopted an equity acceleration policy for our non-employee directors whereby in the event of a change in control, the vesting of 100% of each director’s stock options will be accelerated effect as of the change in control, subject to the applicable director executing a general release of claims against the company and its affiliates. In addition, we reimburse our non-employee directors for travel and other necessary business expenses incurred in the performance of their services for us.

 

145


Table of Contents

The following table sets forth information concerning the compensation earned by our non-employee directors during the year ended December 31, 2019.

 

         
Name    Fees Earned
or
Paid in Cash
($)
     Option
Awards
($)(1)
     All Other
Compensation
($)(2)
     Total
($)
 

James Rothman, Ph.D.

                   250,000        250,000  

John Gunn(3)

                           

Sarah Boyce

            394,498               394,498  

Elizabeth Nelson

            621,334               621,334  

Igor Khandros, Ph.D.

                           

Michael Marks

                           

Michael Moritz

                           

Ming Wu, Ph.D.

                           

Makoto Shintani

                           

 

 

 

(1)   Amounts shown represents the grant date fair value of options granted during fiscal year 2019 as calculated in accordance with ASC Topic 718. See Note 11 of the consolidated financial statements included in this registration statement for the assumptions used in calculating this amount. These amounts do not correspond to the actual value that may be recognized by the director upon exercise of the applicable awards or sale of the underlying shares of stock. We did not grant stock options to any other non-employee director in fiscal year 2019. As of December 31, 2019, the aggregate number of equity awards held by each of our non-employee directors was as follows: Dr. Rothman held options to purchase 375,000 shares of our common stock; Mr. Gunn held options to purchase 50,000 shares of our common stock; Ms. Boyce held options to purchase 100,000 shares of our common stock; Ms. Nelson held options to purchase 107,500 shares of our common stock and 36,875 restricted shares of our common stock acquired upon the early exercise of her option award.

 

(2)   Dr. Rothman received compensation of $250,000 associated with his participation on our Strategic Scientific Advisory Board during 2019.

 

(3)   Mr. Gunn resigned from our board of directors in June 2020.

Because Mr. Lucier joined our board of directors in June 2020 and did not receive any compensation in the year ended December 31, 2019, he is omitted from the table above.

Post-IPO director compensation program

We have approved a compensation policy for our non-employee directors, or the Director Compensation Program, to be effective in connection with the consummation of this offering. Pursuant to the Director Compensation Program, our non-employee directors will receive cash compensation as follows:

 

 

Each non-employee director will receive an annual cash retainer in the amount of $40,000 per year.

 

 

Any non-executive chairperson will receive an additional annual cash retainer in the amount of $30,000 per year.

 

 

The chairperson of the audit committee will receive additional annual cash compensation in the amount of $20,000 per year for such chairperson’s service on the audit committee. Each non-chairperson member of the audit committee will receive additional annual cash compensation in the amount of $10,000 per year for such member’s service on the audit committee.

 

 

The chairperson of the compensation committee will receive additional annual cash compensation in the amount of $12,000 per year for such chairperson’s service on the compensation committee. Each non-chairperson member of the compensation committee will receive additional annual cash compensation in the amount of $6,000 per year for such member’s service on the compensation committee.

 

 

The chairperson of the nominating and corporate governance committee will receive additional annual cash compensation in the amount of $10,000 per year for such chairperson’s service on the nominating and

 

146


Table of Contents
 

corporate governance committee. Each non-chairperson member of the nominating and corporate governance committee will receive additional annual cash compensation in the amount of $5,000 per year for such member’s service on the nominating and corporate governance committee.

Under the Director Compensation Program, each non-employee director will automatically be granted an option to purchase [            ] shares of our common stock upon the director’s initial appointment or election to our board of directors, referred to as the Initial Grant, and an option to purchase [            ] shares of our common stock automatically on the date of each annual stockholder’s meeting thereafter, referred to as the Annual Grant. The Initial Grant will vest as to 1/36th of the underlying shares on a monthly basis over three years, subject to continued service through each applicable vesting date. The Annual Grant will vest on the earlier of the first anniversary of the date of grant or the date of the next annual stockholder’s meeting to the extent unvested as of such date, subject to continued service through each applicable vesting date. The exercise price per share of director options is equal to the fair market value of a share of our common stock on the grant date, and the director options will vest in full upon the consummation of a Change in Control (as defined in the 2020 Plan).

 

147


Table of Contents

Executive compensation

The following is a discussion and analysis of compensation arrangements of our named executive officers, or NEOs. This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an “emerging growth company” as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.

We seek to ensure that the total compensation paid to our executive officers is reasonable and competitive. Compensation of our executives is structured around the achievement of individual performance and near-term corporate targets as well as long-term business objectives.

Our named executive officers, or NEOs, for fiscal year 2019 were as follows:

 

 

Eric D. Hobbs, Ph.D., our Chief Executive Officer;

 

Shaun M. Holt, our Chief Financial Officer; and

 

Keith J. Breinlinger, Ph.D., our Chief Technology Officer.

2019 summary compensation table

The following table sets forth total compensation paid to our named executive officers for the fiscal year ended on December 31, 2019.

 

           
Name and Principal Position   Year     Salary
($)
    Option
Awards
($)(1)(2)
   

Non-Equity Incentive
Compensation

($)(3)

    Total
($)
 

Eric D. Hobbs, Ph.D., Chief Executive Officer

    2019       513,750       6,934,085             7,447,835  

Shaun M. Holt, Chief Financial Officer

    2019       383,000       286,319             669,319  

Keith J. Breinlinger, Ph.D., Chief Technology Officer

    2019       375,000       715,694       64,453       1,155,147  

 

 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)   For the option awards column, amounts shown represents the grant date fair value of stock awards and options granted during fiscal year 2019 as calculated in accordance with ASC Topic 718. See Note 11 of the consolidated financial statements included in this registration statement for the assumptions used in calculating this amount. These amounts do not correspond to the actual value that may be recognized by the NEO upon exercise of the applicable awards or sale of the underlying shares of stock.
(2)   Dr. Hobbs’ option column includes 1,000,000 shares for which vesting is earned based on achievement of certain performance goals established for fiscal years 2019 to 2022. The grant date fair value of the performance-based shares subject to the option assuming the highest level of performance conditions will be achieved is $4,070,065. As of December 31, 2019, no performance criteria had been met and 875,000 such options remained outstanding.
(3)   For the non-equity incentive plan compensation column, the amount shown for Dr. Breinlinger represents the annual performance-based bonus earned based on the achievement of certain corporate and individual goals established for fiscal year 2019. This amount was paid to Dr. Breinlinger in early 2020 following certification of achievement. Please see the descriptions of the annual performance bonuses paid to Dr. Breinlinger under “2019 bonuses” below, including target amount. The other NEOs were not eligible for any annual performance-based bonus in fiscal year 2019.

Narrative to summary compensation table

2019 salaries

Our NEOs each receive a base salary to compensate them for services rendered to our company. The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.

 

148


Table of Contents

The Company increased the base salary of each of Dr. Hobbs and Mr. Holt effective as of February 1, 2019 to $515,000 and $384,000, respectively. For fiscal year 2019, Dr. Breinlinger’s base salary was $375,000.

Our board of directors and compensation committee may adjust base salaries from time to time in their discretion.

2019 bonuses

For service in fiscal year 2019, Dr. Hobbs and Mr. Holt were not eligible to earn any bonuses. Dr. Breinlinger earned a bonus in fiscal year 2019 related to certain corporate and individual performance goals for the fiscal year. For fiscal year 2019, the total target bonus was established as 25% of Dr. Breinlinger’s eligible base salary. Our board of directors and our Chief Executive Officer have historically reviewed these target percentages to ensure they are adequate, but does not follow a formula. Instead, our board of directors and our Chief Executive Officer set these rates based on Dr. Breinlinger’s experience in his role with us and the level of responsibility held by Dr. Breinlinger.

For determining the amount of the target bonus to be paid, our board of directors and our Chief Executive Officer set certain performance goals. In 2019, 50% of the target bonus was tied to revenue targets in the first half of fiscal year and 50% of the target bonus was tied to individual performance in the second half of fiscal year. Following review and determinations of corporate and individual performance for 2019, it was determined that Dr. Breinlinger’s annual bonus was earned at 69% of his target bonus, based on achievement of 100% of the revenue target in the first half of fiscal year 2019 and 38% of the individual performance targets in the second half of fiscal year 2019. The actual amount of the 2019 annual bonus paid to Dr. Breinlinger for 2019 was $64,453.

Equity-based compensation

In fiscal year 2019, we granted options to purchase our common stock to each of our NEOs. In February 2019, we granted each of Dr. Hobbs, Mr. Holt and Dr. Breinlinger an option to purchase 1,000,000, 100,000 and 250,000 shares of our common stock, respectively, each with an exercise price per share equal to the fair market value of our common stock on the date of grant. Each of the awards vests and becomes exercisable as to 1/48th of the shares on each monthly anniversary of February 7, 2019, subject to the applicable holder’s continued service to the Company through the applicable vesting date. In September 2019, we granted Dr. Hobbs an additional option to purchase 1,000,000 shares of our common stock, with an exercise price per share equal to the fair market value of our common stock on the date of grant. The shares become eligible to vest based on achievement of certain performance goals established for fiscal years 2019 to 2022, as determined by our board of directors. Vesting of the applicable number of shares subject to the option will occur in substantially equal installments over a 12- to 24-month period upon achievement of the applicable performance goal, subject to Dr. Hobbs’ continued service through the applicable vesting date. As of December 31, 2019, the performance goals in fiscal year 2019 were not achieved, resulting in a forfeiture of 125,000 shares and, as of December 31, 2019, none of the performance criteria had been achieved and therefore none of the shares were vested or exercisable.

In June 2016, we adopted a double trigger equity acceleration policy for our executive officers, including our NEOs, whereby if, within 12 months following a change in control, the applicable executive is terminated by us without cause or by the individual for good reason, then the vesting of 100% of the executive’s outstanding stock options will be accelerated as of such termination, subject to the applicable individual’s execution of a general release of claims against us and our affiliates. With respect to Dr. Hobbs’ performance-based stock option described above, all performance conditions subject to the option will be deemed satisfied at target in addition to the accelerated vesting described above, effective as of the date of the qualifying termination.

 

149


Table of Contents

We have adopted, subject to stockholder approval, a 2020 Incentive Award Plan, referred to below as the 2020 Plan, in order to facilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of our company and certain of its affiliates and to enable us to obtain and retain services of these individuals, which is essential to our long-term success. The 2020 Plan will be effective on the day prior to our public trading date, subject to approval of such plan by our stockholders. For additional information about the 2020 Plan, please see the section titled “Equity compensation plans” below.

Other elements of compensation

Retirement savings and health and welfare benefits

We currently maintain a 401(k) retirement savings plan for our employees, including our named executive officers, who satisfy certain eligibility requirements. Our NEOs are eligible to participate in the 401(k) plan on the same terms as other full-time employees. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our named executive officers, in accordance with our compensation policies.

All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans, including medical, dental and vision benefits; medical and dependent care flexible spending accounts; short-term and long-term disability insurance; and life and AD&D insurance.

Perquisites and other personal benefits

We provide limited perquisites to our NEOs when our compensation committee determines that such perquisites are necessary or advisable to fairly compensate or incentivize our employees. In 2019, we did not provide our NEOs with any perquisites that were not provided to all employees generally.

 

150


Table of Contents

Outstanding equity awards at 2019 fiscal year end

The following table lists all outstanding equity awards held by our NEOs as of December 31, 2019.

 

     
             Option Awards  
Name    Vesting
Commencement
Date(1)(2)
    Number
of Securities
Underlying
Unexercised
Options
(#)
Exercisable
     Number
Of Securities
Underlying
Unexercised
Options
(#)
Unexercisable
     Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
     Option
Exercise
Price
($)
     Option
Expiration
Date
 

Eric D. Hobbs,
Ph.D., Chief Executive Officer

    

5/6/2013

2/14/2015

8/16/2016

1/6/2015

3/24/2016

4/14/2017

11/2/2017

2/7/2019

9/12/2019

 

(3)(4)  

(4)  

 

 

(4)  

(4)  

(4)  

(5)  

   

75,000

50,000

52,083

37,500

54,000

166,667

260,417

208,333

 

 

 

 

 

 

 

 

 

    


10,417

6,000

83,333

239,583

791,667

 

 

 

 

 

 

 

 

 

    


875,000

 

 

 

 

 

 

 

 

 

   $

 

0.12

0.12

0.64

0.64

2.26

2.54

2.10

6.26

8.90

 

 

 

 

 

 

 

 

 

    

6/16/2023

2/26/2024

10/13/2024

2/12/2025

3/23/2026

4/13/2027

11/1/2027

2/6/2029

9/12/2029

 

 

 

 

 

 

 

 

 

Shaun M. Holt,
Chief Financial Officer

    

11/16/2015

3/24/2016

11/2/2017

2/7/2019

 

 

(4)  

(4)  

   

250,000

67,500

52,083

20,833

 

 

 

 

    


7,500

47,917

79,167

 

 

 

 

    


 

 

 

 

    

2.26

2.26

2.10

6.26

 

 

 

 

    

11/30/2025

3/23/2026

11/1/2027

2/6/2029

 

 

 

 

Keith J.
Breinlinger, Ph.D., Chief Technology Officer

    

3/18/2013

2/14/2015

8/16/2016

1/16/2015

3/24/2016

2/2/2017

11/2/2017

2/7/2019

 

(3)(4)  

(4)  

 

 

(4)  

(4)  

(4)  

   

56,000

50,000

41,667

25,000

33,750

88,542

78,125

52,083

 

 

 

 

 

 

 

 

    


8,333

3,750

36,458

71,875

197,917

 

 

 

 

 

 

 

 

    


 

 

 

 

 

 

 

 

    

0.12

0.12

0.64

0.64

2.26

2.54

2.10

6.26

 

 

 

 

 

 

 

 

    

6/16/2023

2/26/2024

10/13/2024

2/12/2025

3/23/2026

2/1/2027

11/1/2027

2/6/2029

 

 

 

 

 

 

 

 

 

    

 

 

 

 

(1)  

Except as otherwise noted, options and stock awards vest as to 25% of the shares on the one year anniversary of the vesting commencement date and vest as to 1/48th of the shares monthly thereafter, such that all awards will be vested on the four year anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.

 

(2)   All of the stock options held by each of our NEOs are eligible to receive accelerated vesting, as described above under our equity acceleration policy.

 

(3)   The option is early exercisable in exchange for restricted shares subject to a right of repurchase in favor of the Company.

 

(4)  

1/48th of the shares vest on each monthly anniversary of the vesting commencement date, such that all awards will be vested on the four year anniversary of the vesting commencement date, subject to the holder continuing to provide services to the Company through such vesting date.

 

(5)   The shares become eligible to vest based on achievement certain performance goals established for fiscal years 2019 to 2022, established and evaluated by our board of directors. Vesting of the applicable number of shares subject to the option will occur in substantially equal installments over a 12-month period upon achievement of the applicable performance goal, subject to Dr. Hobbs’ continued service through the applicable vesting date, and the shares subject to the option are either achieved or not achieved. As of December 31, 2019, none of these criteria had been achieved and therefore none of the shares were vested or exercisable.

 

151


Table of Contents

Executive compensation arrangements

Offer letters

Eric D. Hobbs, Ph.D.

In May 2013, we entered into an offer letter with Dr. Hobbs, under which he was entitled to an annual base salary of $200,000, eligibility to participate in our benefit plans and an option to purchase 75,000 shares of our common stock. For a description of the material terms of this stock option grant, see footnotes 1 and 2 to the outstanding equity awards at 2019 fiscal year end table.

Shaun M. Holt

In October 2015, we entered into an offer letter with Mr. Holt, under which he was entitled to an annual base salary of $360,000, eligibility to participate in our benefit plans, $30,000 of relocation assistance to relocate to the San Francisco, Bay Area, temporary lodging for up to one month and an option to purchase 250,000 shares of our common stock. For a description of the material terms of this stock option grant, see footnotes 1 and 2 to the outstanding equity awards at 2019 fiscal year end table.

Keith J. Breinlinger, Ph.D.

In February 2013, we entered into an offer letter with Dr. Breinlinger, under which he was entitled to an annual base salary of $200,000, eligibility to participate in our benefit plans and an option to purchase 90,000 shares of our common stock. For a description of the material terms of this stock option grant, see footnotes 1 and 2 to the outstanding equity awards at 2019 fiscal year end table.

Severance agreements

In July 2020, in connection with this offering, we approved the entry into new severance agreements with all of our named executive officers that supersedes and replaces the severance benefits they would otherwise be entitled to receive.

Under these severance agreements with each of our NEOs, if such NEO’s employment with us is terminated without “cause” or such NEO resigns for “good reason” (as each is defined in the severance agreement), the applicable NEO will be entitled to receive: (i) nine months of continued base salary (or 12 months for Dr. Hobbs) and (ii) payment or reimbursement of the cost of continued healthcare coverage for nine months (or 12 months for Dr. Hobbs). In lieu of the foregoing benefits, if each NEO’s employment with us is terminated without “cause” or such NEO resigns for “good reason” during the 45 day period prior to, or the 12-month period following a Change in Control (as defined in the 2019 Plan), he will be entitled to receive: (i) 12 months of continued base salary (or 18 months for Dr. Hobbs), (ii) payment or reimbursement of the cost of continued healthcare coverage for 12 months (or 18 months for Dr. Hobbs), (iii) an amount equal to 12 months of such NEO’s annual bonus for the year of termination assuming 100% of target performance (or 18 months for Dr. Hobbs) and (iv) full accelerated vesting of any of his unvested equity awards (except for any performance awards). The foregoing severance benefits are subject to his delivery of an executed release of claims against us and continued compliance with his confidentiality agreement with us.

Equity compensation plans

The following summarizes the material terms of the long-term incentive compensation plan in which our named executive officers will be eligible to participate following the consummation of this offering and our 2011 Equity Incentive Plan, as amended, or the 2011 Plan, under which we have previously made periodic grants of equity and equity-based awards to our named executive officers and other key employees.

 

152


Table of Contents

2020 Incentive Award Plan

We have adopted and will ask our stockholders to approve the 2020 Plan, which will be effective on the day prior to the first public trading date of our common stock. The principal purpose of the 2020 Plan is to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards. The material terms of the 2020 Plan, as it is currently contemplated, are summarized below.

Share reserve. Under the 2020 Plan, 6,750,000 shares of our common stock will be initially reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock appreciation rights, or SARs, restricted stock awards, restricted stock unit awards and other stock-based awards, plus the number of shares remaining available for future awards under the 2011 Plan, as of the effective date of the 2020 Plan. The number of shares initially reserved for issuance or transfer pursuant to awards under the 2020 Plan will be increased by (i) the number of shares represented by awards outstanding under our 2011 Plan that are forfeited or lapse unexercised and which following the effective date are not issued under our 2011 Plan plus (ii) an annual increase on the first day of each fiscal year beginning in 2021 and ending in 2030, equal to the lesser of (A) 4% of the shares of stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (B) such smaller number of shares of stock as determined by our board of directors; provided, however, that no more than 50,000,000 shares of stock may be issued upon the exercise of incentive stock options.

The following counting provisions will be in effect for the share reserve under the 2020 Plan:

 

 

to the extent that an award terminates, expires or lapses for any reason or an award is settled in cash without the delivery of shares, any shares subject to the award at such time will be available for future grants under the 2020 Plan;

 

 

to the extent shares are tendered or withheld to satisfy the grant, exercise price or tax withholding obligation with respect to any award under the 2020 Plan, such tendered or withheld shares will be available for future grants under the 2020 Plan;

 

 

to the extent shares subject to stock appreciation rights are not issued in connection with the stock settlement of stock appreciation rights on exercise thereof, such shares will be available for future grants under the 2020 Plan;

 

 

to the extent that shares of our common stock are repurchased by us prior to vesting so that shares are returned to us, such shares will be available for future grants under the 2020 Plan;

 

 

the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2020 Plan; and

 

 

to the extent permitted by applicable law or any exchange rule, shares issued in assumption of, or in substitution for, any outstanding awards of any entity acquired in any form of combination by us or any of our subsidiaries will not be counted against the shares available for issuance under the 2020 Plan.

Administration. The compensation committee of our board of directors is expected to administer the 2020 Plan unless our board of directors assumes authority for administration. The compensation committee must consist of at least three members of our board of directors, each of whom is intended to qualify as a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act and an “independent director” within the meaning of the rules of the applicable stock exchange, or other principal securities market on which shares of our common stock are traded. The 2020 Plan provides that the board or compensation committee may delegate its authority to grant awards to employees other than executive officers and certain senior executives of the

 

153


Table of Contents

company to a committee consisting of one or more members of our board of directors or one or more of our officers, other than awards made to our non-employee directors, which must be approved by our full board of directors.

Subject to the terms and conditions of the 2020 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2020 Plan. The administrator is also authorized to adopt, amend or rescind rules relating to administration of the 2020 Plan. Our board of directors may at any time remove the compensation committee as the administrator and revest in itself the authority to administer the 2020 Plan. The full board of directors will administer the 2020 Plan with respect to awards to non-employee directors.

Eligibility. Options, SARs, restricted stock and all other stock-based and cash-based awards under the 2020 Plan may be granted to individuals who are then our officers, employees or consultants or are the officers, employees or consultants of certain of our subsidiaries. Such awards also may be granted to our directors. Only employees of our company or certain of our subsidiaries may be granted incentive stock options, or ISOs.

Awards. The 2020 Plan provides that the administrator may grant or issue stock options, SARs, restricted stock, restricted stock units, other stock- or cash-based awards and dividend equivalents, or any combination thereof. Each award will be set forth in a separate agreement with the person receiving the award and will indicate the type, terms and conditions of the award.

 

 

Nonstatutory stock options, or NSOs, will provide for the right to purchase shares of our common stock at a specified price which may not be less than fair market value on the date of grant, and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with us and/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NSOs may be granted for any term specified by the administrator that does not exceed ten years.

 

 

Incentive stock options, or ISOs, will be designed in a manner intended to comply with the provisions of Section 422 of the Code and will be subject to specified restrictions contained in the Code. Among such restrictions, ISOs must have an exercise price of not less than the fair market value of a share of common stock on the date of grant, may only be granted to employees, and must not be exercisable after a period of ten years measured from the date of grant. In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our capital stock, the 2020 Plan provides that the exercise price must be at least 110% of the fair market value of a share of common stock on the date of grant and the ISO must not be exercisable after a period of five years measured from the date of grant.

 

 

Restricted stock may be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted stock, typically, may be forfeited for no consideration or repurchased by us at the original purchase price if the conditions or restrictions on vesting are not met. In general, restricted stock may not be sold or otherwise transferred until restrictions are removed or expire. Purchasers of restricted stock, unlike recipients of options, will have voting rights and will have the right to receive dividends, if any, prior to the time when the restrictions lapse, however, extraordinary dividends will generally be placed in escrow, and will not be released until restrictions are removed or expire.

 

 

Restricted stock units may be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted stock, restricted stock units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted stock, stock

 

154


Table of Contents
 

underlying restricted stock units will not be issued until the restricted stock units have vested, and recipients of restricted stock units generally will have no voting or dividend rights prior to the time when vesting conditions are satisfied.

 

 

Stock appreciation rights, or SARs, may be granted in connection with stock options or other awards, or separately. SARs granted in connection with stock options or other awards typically will provide for payments to the holder based upon increases in the price of our common stock over a set exercise price. The exercise price of any SAR granted under the 2020 Plan must be at least 100% of the fair market value of a share of our common stock on the date of grant. SARs under the 2020 Plan will be settled in cash or shares of our common stock, or in a combination of both, at the election of the administrator.

 

 

Other stock or cash-based awards are awards of cash, fully vested shares of our common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our common stock. Other stock or cash-based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of base salary, bonus, fees or other cash compensation otherwise payable to any individual who is eligible to receive awards. The plan administrator will determine the terms and conditions of other stock or cash-based awards, which may include vesting conditions based on continued service, performance and/or other conditions.

 

 

Dividend equivalents represent the right to receive the equivalent value of dividends paid on shares of our common stock and may be granted alone or in tandem with awards other than stock options or SARs. Dividend equivalents are credited as of dividend payments dates during the period between a specified date and the date such award terminates or expires, as determined by the plan administrator. In addition, dividend equivalents with respect to shares covered by a performance award will only be paid to the participant at the same time or times and to the same extent that the vesting conditions, if any, are subsequently satisfied and the performance award vests with respect to such shares.

Any award may be granted as a performance award, meaning that the award will be subject to vesting and/or payment based on the attainment of specified performance goals.

Change in control. In the event of a change in control, unless the plan administrator elects to terminate an award in exchange for cash, rights or other property, or cause an award to accelerate in full prior to the change in control, such award will continue in effect or be assumed or substituted by the acquirer, provided that any performance-based portion of the award will be subject to the terms and conditions of the applicable award agreement. In the event the acquirer refuses to assume or replace awards granted, prior to the consummation of such transaction, awards issued under the 2020 Plan will be subject to accelerated vesting such that 100% of such awards will become vested and exercisable or payable, as applicable. The administrator may also make appropriate adjustments to awards under the 2020 Plan and is authorized to provide for the acceleration, cash-out, termination, assumption, substitution or conversion of such awards in the event of a change in control or certain other unusual or nonrecurring events or transactions.

Adjustments of awards. In the event of any stock dividend or other distribution, stock split, reverse stock split, reorganization, combination or exchange of shares, merger, consolidation, split-up, spin-off, recapitalization, repurchase or any other corporate event affecting the number of outstanding shares of our common stock or the share price of our common stock that would require adjustments to the 2020 Plan or any awards under the 2020 Plan in order to prevent the dilution or enlargement of the potential benefits intended to be made available thereunder, the administrator will make appropriate, proportionate adjustments to: (i) the aggregate number and type of shares subject to the 2020 Plan; (ii) the number and kind of shares subject to outstanding awards and terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards); and (iii) the grant or exercise price per share of any outstanding awards under the 2020 Plan.

 

155


Table of Contents

Amendment and termination. The administrator may terminate, amend or modify the 2020 Plan at any time and from time to time. However, we must generally obtain stockholder approval to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule). Notwithstanding the foregoing, an option may be amended to reduce the per share exercise price below the per share exercise price of such option on the grant date and options may be granted in exchange for, or in connection with, the cancellation or surrender of options having a higher per share exercise price without receiving additional stockholder approval.

No incentive stock options may be granted pursuant to the 2020 Plan after the tenth anniversary of the effective date of the 2020 Plan, and no additional annual share increases to the 2020 Plan’s aggregate share limit will occur from and after such anniversary. Any award that is outstanding on the termination date of the 2020 Plan will remain in force according to the terms of the 2020 Plan and the applicable award agreement.

2011 Equity Incentive Plan

Our board of directors adopted the 2011 Plan on June 10, 2011, which has been periodically amended from time to time, and was approved by our stockholders on December 16, 2011. Following this offering, and in connection with the effectiveness of our 2020 Plan, no further awards will be granted under the 2011 Plan. However, all outstanding awards under the 2011 Plan will continue to be governed by their existing terms under the 2011 Plan. Upon the circumstances set forth under the description of our 2020 Plan, shares subject to outstanding awards under the 2011 Plan will be added to the share reserve of the 2020 Plan. The purpose of the 2011 Plan is to attract, retain and motivate eligible persons whose present and potential contributions are important to our success by offering eligible persons an opportunity to participate in the 2011 Plan.

Share reserve. Under the 2011 Plan, we have previously reserved 12,628,347 shares of common stock. Upon the effectiveness of the 2020 Plan, no additional stock awards may be granted under the 2011 Plan. Any equity awards granted under the 2011 Plan will remain subject to the terms of the 2011 Plan and applicable award agreement, until such outstanding awards that are stock options are exercised, terminate or expire by their terms, and until any restricted stock awards become vested, terminate or are forfeited.

Administration. Our board of directors, or a committee appointed by our board of directors, acts as the administrator of the 2011 Plan. The 2011 Plan provides that the board may delegate its authority to grant to a committee consisting of one or more members of our board of directors or one or more of our officers so long as such officer is a member of the board, other than awards made to our non-employee directors, which must be approved by our full board of directors. Subject to the terms and conditions of the 2011 Plan, the administrator has the authority to select the persons to whom awards are to be made, to determine the number of shares to be subject to awards and the terms and conditions of awards, and to make all other determinations and to take all other actions necessary or advisable for the administration of the 2011 Plan. The administrator has the full power to implement and carry out the 2011 Plan.

Eligibility. Options, restricted stock, restricted stock units and other stock-based awards under the 2011 Plan may be granted to officers, employees, directors and consultants of the Company and its affiliates. Only employees of our company or certain of our subsidiaries may be granted incentive stock options, or ISOs.

Awards. The 2011 Plan provides for the grant or issue of stock options (both ISOs and NSOs), SARs, restricted stock, restricted stock units, other stock- or cash-based awards and dividend equivalents, or any combination thereof. Each award is set forth in a separate agreement with the person receiving the award which indicates the type, terms and conditions of the award.

Adjustments of awards. In the event that the number of outstanding shares of our common stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or

 

156


Table of Contents

similar change in our capital structure without consideration, then (a) the number of shares of common stock reserved for issuance under the 2011 Plan, (b) the exercise prices of and number of shares subject to outstanding options and SARs and (c) the purchase prices of and/or number of shares of common stock subject to other outstanding awards will be proportionately adjusted.

Corporate transaction. In the case of an acquisition or other combination (as each such term is defined in the 2011 Plan), the administrator may, in its discretion, provide for (a) the assumption, replacement or substitution of awards in exchange for equivalent awards, substantially similar consideration or other property for the shares subject to outstanding awards or (b) if awards are not assumed, replaced or substituted, the cancellation of awards without accelerated vesting.

Amendment and termination. The administrator may terminate or amend the 2011 Plan at any time and from time to time and may terminate any and all outstanding options or SARs upon a dissolution or liquidation of the company, followed by the payment of creditors and the distribution of any remaining funds to our stockholders. However, we must generally obtain stockholder approval to the extent required by applicable law.

2020 Employee Stock Purchase Plan

We have adopted and will ask our stockholders to approve the 2020 Employee Stock Purchase Plan, which we refer to as our ESPP, and which will become effective on the day prior to the first public trading date of our common stock. The ESPP is designed to allow our eligible employees to purchase shares of our common stock, at semi-annual intervals, with their accumulated payroll deductions. The material terms of the ESPP are summarized below.

Components. The ESPP is comprised of two distinct components in order to provide increased flexibility to grant options to purchase shares under the ESPP to U.S. and to non-U.S. employees. Specifically, the ESPP authorizes (1) the grant of options to U.S. employees that are intended to qualify for favorable U.S. federal tax treatment under Section 423 of the Code (the “Section 423 Component”), and (2) the grant of options that are not intended to be tax-qualified under Section 423 of the Code to facilitate participation for employees located outside of the United States who do not benefit from favorable U.S. tax treatment and to provide flexibility to comply with non-U.S. law and other considerations (the “Non Section 423 Component”). Where possible under local law and custom, we expect that the Non-Section 423 Component generally will be operated and administered on terms and conditions similar to the Section 423 Component.

Administration. Subject to the terms and conditions of the ESPP, our compensation committee will administer the ESPP. Our compensation committee can delegate administrative tasks under the ESPP to the services of an agent and/or employees to assist in the administration of the ESPP. The administrator will have the discretionary authority to administer and interpret the ESPP. Interpretations and constructions of the administrator of any provision of the ESPP or of any rights thereunder will be conclusive and binding on all persons. We will bear all expenses and liabilities incurred by the ESPP administrator.

Share reserve. The maximum number of shares of our common stock which are authorized for sale under the ESPP is equal to the sum of (a) 612,150 shares of common stock and (b) an annual increase on the first day of each year beginning in 2021 and ending in 2030, equal to the lesser of (i) 1% of the shares of common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by our board of directors; provided, however, no more than 10,000,000 shares of our common stock may be issued under the ESPP. The shares reserved for issuance under the ESPP may be authorized but unissued shares or reacquired shares.

Eligibility. Employees eligible to participate in the ESPP for a given offering period generally include employees who are employed by us or one of our subsidiaries on the first day of the offering period, or the enrollment

 

157


Table of Contents

date. Our administrator has the discretion to exclude from participation our employees (and, if applicable, any employees of our subsidiaries) who customarily work less than five months in a calendar year or are customarily scheduled to work less than 20 hours per week will not be eligible to participate in the ESPP. Finally, an employee who owns (or is deemed to own through attribution) 5% or more of the combined voting power or value of all our classes of stock or of one of our subsidiaries will not be allowed to participate in the ESPP.

Participation. Employees will enroll under the ESPP by completing a payroll deduction form permitting the deduction from their compensation of at least 1% of their compensation but not more than 15% of their compensation. Such payroll deductions will be expressed as a whole number percentage, and the accumulated deductions will be applied to the purchase of shares on each purchase date. However, a participant may not purchase more than 2,000 shares in each offering period and may not subscribe for more than $25,000 in fair market value of shares of our common stock (determined at the time the option is granted) during any calendar year. The ESPP administrator has the authority to change these limitations for any subsequent offering period.

Offering. Generally, the ESPP will offer employees the option to purchase shares through a series of consecutive six month offering periods (with the same length of purchase periods). The initial offering period under the ESPP will be longer than six months, commencing upon the day prior to our public trading date and ending on March 1, 2021. However, in no event may an offering period be longer than 27 months in length.

The option purchase price will be the lower of 85% of the closing trading price per share of our common stock on the first trading date of an offering period in which a participant is enrolled or 85% of the closing trading price per share on the purchase date, which will occur on the last trading day of each offering period. The price per share of our common stock on the first day of the initial offering period shall be the initial offering price of our common stock set forth on the cover of this prospectus.

Unless a participant has previously canceled his or her participation in the ESPP before the purchase date, the participant will be deemed to have exercised his or her option in full as of each purchase date. Upon exercise, the participant will purchase the number of whole shares that his or her accumulated payroll deductions will buy at the option purchase price, subject to the participation limitations listed above.

A participant may cancel his or her payroll deduction authorization at any time prior to the end of the offering period. Upon cancellation, the participant will have the option to either (i) receive a refund of the participant’s account balance in cash without interest or (ii) exercise the participant’s option for the current offering period for the maximum number of shares of common stock on the applicable purchase date, with the remaining account balance refunded in cash without interest. Following at least one payroll deduction, a participant may also decrease (but not increase) his or her payroll deduction authorization once during any offering period. If a participant wants to increase or decrease the rate of payroll withholding, he or she may do so effective for the next offering period by submitting a new form before the offering period for which such change is to be effective.

A participant may not assign, transfer, pledge or otherwise dispose of (other than by will or the laws of descent and distribution) payroll deductions credited to a participant’s account or any rights to exercise an option or to receive shares of our common stock under the ESPP, and during a participant’s lifetime, options in the ESPP shall be exercisable only by such participant. Any such attempt at assignment, transfer, pledge or other disposition will not be given effect.

Adjustments upon changes in recapitalization, dissolution, liquidation, merger or asset sale. In the event of any increase or decrease in the number of issued shares of our common stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the common stock, or any other increase or

 

158


Table of Contents

decrease in the number of shares of common stock effected without receipt of consideration by us, we will proportionately adjust the aggregate number of shares of our common stock offered under the ESPP, the number and price of shares which any participant has elected to purchase under the ESPP and the maximum number of shares which a participant may elect to purchase in any single offering period. If there is a proposal to dissolve or liquidate us, then the ESPP will terminate immediately prior to the consummation of such proposed dissolution or liquidation, and any offering period then in progress will be shortened by setting a new purchase date to take place before the date of our dissolution or liquidation. We will notify each participant of such change in writing at least ten business days prior to the new exercise date. If we undergo a merger with or into another corporation or sell all or substantially all of our assets, each outstanding option will be assumed or an equivalent option substituted by the successor corporation or the parent or subsidiary of the successor corporation. If the successor corporation refuses to assume the outstanding options or substitute equivalent options, then any offering period then in progress will be shortened by setting a new purchase date to take place before the date of our proposed sale or merger. We will notify each participant of such change in writing at least ten business days prior to the new exercise date.

Amendment and termination. Our board of directors may amend, suspend or terminate the ESPP at any time. However, the board of directors may not amend the ESPP without obtaining stockholder approval within 12 months before or after such amendment to the extent required by applicable laws.

 

159


Table of Contents

Certain relationships and related party transactions

In addition to the compensation arrangements, including employment, termination of employment and change in control arrangements, with our directors and executive officers, including those discussed in the sections titled “Management” and “Executive compensation,” the following is a description of each transaction since January 1, 2017 and each currently proposed transaction in which:

 

 

we have been or are to be a participant;

 

 

the amounts involved exceeded or will exceed $120,000; and

 

 

any of our directors, executive officers or holders of more than five percent of our capital stock or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest.

Sale of Series E convertible preferred stock

In March, April, May, June and September 2018, we issued and sold an aggregate of 9,103,617 shares of our Series E convertible preferred stock at a purchase price of $10.4354 per share for aggregate gross proceeds of $95.0 million. All shares of our Series E convertible preferred stock will convert into shares of our common stock immediately prior to the closing of this offering in accordance with our certificate of incorporation. The following table summarizes purchases of shares of our Series E convertible preferred stock by our directors, executive officers, or holders of more than 5% of our capital stock or entities affiliated with them.

 

     
Participants(1)    Shares      Aggregate
Purchase Price
 

Entities affiliated with Nikon Corporation(2)

     2,874,829      $ 29,999,995.77  

Entities affiliated with WRVI Capital(3)

     735,635      $ 7,676,645.48  

Entities affiliated with Sequoia Capital(4)

     479,136      $ 4,999,986.25  

Paxion Capital, LP(5)

     287,482      $ 2,999,994.89  

The Marks Family Trust(5)

     19,230      $ 200,672.75  

 

 

 

(1)   Additional details regarding these stockholders and their equity holdings are provided in this prospectus under the caption “Principal stockholders.”

 

(2)   Represents securities acquired by Nikon Corporation. Makoto Shintani, a member of our board of directors, was then a corporate vice president at Nikon Corporation.

 

(3)   Represents securities acquired by Walden Riverwood Ventures, L.P., WRV-BLI II, LLC, WRV-BLI III, LLC, WRV-BLI IV, LLC, WRV-BLI, LLC and WRV II, L.P. Michael Marks, a member of our board of directors, is an affiliate of WRVI Capital.

 

(4)   Represents securities acquired by Sequoia Capital U.S. Growth Fund VI, L.P., Sequoia Capital U.S. Venture Fund XV, L.P., Sequoia Capital U.S. Venture XV Principals Fund, L.P., Sequoia Capital U.S. Growth VI Principals Fund, L.P., Sequoia Capital U.S. Venture Partners Fund XV (Q), L.P. and Sequoia Capital U.S. Venture Partners Fund XV, L.P. Michael Moritz, a member of our board of directors, is a general partner at Sequoia Capital, which is an affiliate of Sequoia Capital U.S. Growth Fund VI, L.P., Sequoia Capital U.S. Venture Fund XV, L.P., Sequoia Capital U.S. Venture XV Principals Fund, L.P., Sequoia Capital U.S. Growth VI Principals Fund, L.P., Sequoia Capital U.S. Venture Partners Fund XV (Q), L.P. and Sequoia Capital U.S. Venture Partners Fund XV, L.P.

 

(5)   Michael Marks, a member of our board of directors, is, or was at the time of the transaction, an affiliate of the purchaser.

Investors’ rights agreement

We are party to an amended and restated investors’ rights agreement, or the Investors’ Rights Agreement, with certain holders of our convertible preferred stock, including certain holders of 5% or more of our capital stock and entities affiliated with certain of our directors, as well as certain of our directors and executive officers. The Investors’ Rights Agreement grants rights to certain holders, including certain registration rights with respect to the registrable securities held by them, and also imposes certain affirmative obligations on us, including with respect to the furnishing of financial statements and information to the holders. See “Description of capital stock—Registration rights” for additional information.

 

160


Table of Contents

The Investors Rights Agreement also provides certain holders with information rights, which will terminate in connection with the completion of this offering, and a right of first refusal with regard to certain issuances of our capital stock, which will not apply to, and will terminate upon the completion of this offering. We will remain obligated to comply with reporting requirements under the Exchange Act.

Voting agreement

We are party to an amended and restated voting agreement, under which certain holders of our capital stock, including certain holders of 5% or more of our capital stock and entities affiliated with certain of our directors and certain of our directors and executive officers, have agreed to vote in a certain way on certain matters, including with respect to the election of directors. The voting agreement will terminate in connection with the completion of this offering and none of our stockholders will have any continuing voting rights, including special rights regarding the election or designation of members of our board of directors, following this offering. For a description of the amended and restated voting agreement, see “Management—Board composition—Voting arrangements.”

Right of first refusal and co-sale agreement

We are party to an amended and restated first refusal and co-sale agreement with holders of our convertible preferred stock, including certain holders of 5% or more of our capital stock and entities affiliated with certain of our directors, pursuant to which we have a right of first refusal, and certain holders satisfying an ownership threshold of convertible preferred stock have a right of first refusal and co-sale, in respect of certain sales of securities by specified holders of convertible preferred stock. The right of first refusal and co-sale agreement will terminate in connection with the completion of this offering.

Distribution agreement with Nikon Corporation

In January 2018, we entered into a distribution agreement with Nikon Instech Co., Ltd. and Nikon Corporation, or Nikon, as our exclusive distributor of our products in Japan. Nikon is the holder of greater than 5% of our capital stock, and Makoto Shintani, a member of our board of directors, was then a corporate vice president at Nikon. In March 2019, we entered into an amended and restated distribution agreement with Nikon, as our exclusive distributor of our products in Japan, Singapore, Thailand and South Korea and our non-exclusive distributor in China. As the exclusive distributor in Japan, Singapore, Thailand and South Korea, Nikon is required to purchase a minimum quantity of our products every six months throughout the term of the distribution agreement, which expires in March 2022. The revenue recognized by us under this distribution agreement during the years ended December 31, 2018 and 2019 and the three months ended March 31, 2019 and 2020 was $1.1 million, $3.7 million, $40,000 and $1.8 million, respectively. The accounts receivable balance under this distribution agreement as of December 31, 2018 was insignificant, and the accounts receivable under the distribution agreement at December 31, 2019 and March 31, 2020 was $127,000 and $1.8 million, respectively.

Advisory agreement with James Rothman, Ph.D.

In April 2017, we entered into a strategic/scientific advisor consulting agreement with James E. Rothman, Ph.D., a member of our board of directors, pursuant to which Dr. Rothman agreed to provide us with consulting and advisory services relating to, among other things, our research and development activities and commercialization of our platform. In consideration of Dr. Rothman’s services, we agreed to pay Dr. Rothman $250,000 per year, reimburse his out of pocket expenses and grant him an option to purchase 250,000 shares of our common stock. The original term of the agreement was for a period of 36 months. In March 2020, we

 

161


Table of Contents

entered into an amendment to the agreement, pursuant to which we agreed to extend the term of the agreement for an additional 36 months (expiring on April 1, 2023), to pay Dr. Rothman $125,000 per year during the extended term, and to grant Dr. Rothman an option to purchase an additional 157,500 shares of our common stock.

Equity grants to executive officers and directors

We have granted options to our named executive officers and certain of our non-employee directors as more fully described in the sections entitled “Management—Director compensation” and “Executive compensation.”

Limitation of liability and indemnification

Our amended and restated certificate of incorporation and our amended and restated bylaws, each of which will be effective upon the completion of this offering, will provide that we will indemnify our directors and officers to the fullest extent permitted under Delaware law, which prohibits our amended and restated certificate of incorporation from limiting the liability of our directors for the following:

 

 

any breach of the director’s duty of loyalty to us or our stockholders;

 

 

acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law;

 

 

unlawful payments of dividends or unlawful stock repurchases or redemptions; or

 

 

any transaction from which the director derived an improper personal benefit.

Our amended and restated certificate of incorporation and our amended and restated bylaws will also provide that if Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delaware law, as so amended. This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission.

Our amended and restated certificate of incorporation and our amended and restated bylaws will also provide that we shall have the power to indemnify our employees and agents to the fullest extent permitted by law. Our amended and restated bylaws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in this capacity, regardless of whether we would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware. We have obtained directors’ and officers’ liability insurance.

In connection with this offering, we intend to enter into separate indemnification agreements with our directors and executive officers, in addition to indemnification provided for in our amended and restated certificate of incorporation and amended and restated bylaws.

These agreements, among other things, provide for indemnification of our directors and executive officers for expenses, judgments, fines and settlement amounts incurred by this person in any action or proceeding arising out of this person’s services as a director or executive officer or at our request. We believe that these provisions in our amended and restated certificate of incorporation and amended and restated bylaws and indemnification agreements are necessary to attract and retain qualified persons as directors and executive officers.

The above description of the indemnification provisions of our amended and restated certificate of incorporation, our amended and restated bylaws and our indemnification agreements is not complete and is qualified in its entirety by reference to these documents, each of which is filed as an exhibit to this registration

 

162


Table of Contents

statement to which this prospectus forms a part. The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. Insofar as indemnification for liabilities under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

Policies and procedures for related party transactions

Our board of directors has adopted a written related person transaction policy, to be effective upon the completion of this offering, setting forth the policies and procedures for the review and approval or ratification of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K under the Securities Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships, in which we were or are to be a participant, where the amount involved exceeds $120,000 in any fiscal year and a related person had, has or will have a direct or indirect material interest, including without limitation, purchases of goods or services by or from the related person or entities in which the related person has a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person. In reviewing and approving any such transactions, our audit committee is tasked to consider all relevant facts and circumstances, including, but not limited to, whether the transaction is on terms comparable to those that could be obtained in an arm’s length transaction and the extent of the related person’s interest in the transaction. All of the transactions described in this section occurred prior to the adoption of this policy.

 

163


Table of Contents

Principal stockholders

The following table presents information as to the beneficial ownership of our common stock as of March 31, 2020, for:

 

 

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

 

 

each named executive officer;

 

 

each of our current directors; and

 

 

all of our current directors and executive officers as a group.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all shares beneficially owned, subject to community property laws where applicable. Common stock subject to options or other rights to acquire common stock that are currently exercisable or exercisable within 60 days of March 31, 2020 are deemed to be outstanding and to be beneficially owned by the person holding such options or rights for the purpose of computing the percentage ownership of that person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

The percentage of shares beneficially owned “prior to this offering” is computed on the basis of 53,543,919 shares of our common stock outstanding as of March 31, 2020, which reflects the assumed conversion of all of our outstanding shares of convertible preferred stock into an aggregate of 50,462,272 shares of common stock upon the completion of this offering. Shares of our common stock that a person has the right to acquire within 60 days of March 31, 2020 are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights, but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage ownership of all directors and executive officers as a group. The percentage ownership information under the column titled “Beneficial ownership after this offering” is based on 60,943,919 shares of common stock outstanding on March 31, 2020, adjusted as described above, and which gives further effect to the issuance of 7,400,000 shares of common stock in this offering and assumes no exercise of the underwriters’ option to purchase additional shares. Unless otherwise indicated, the address of each of the individuals and entities named below is c/o Berkeley Lights, Inc., 5858 Horton Street, Suite 320, Emeryville, California 94608.

 

164


Table of Contents
     
    Beneficial ownership prior to this offering     Beneficial ownership after
this offering
 
Name of beneficial owner  

Number of

outstanding

shares

beneficially

owned

   

Number of

shares

exercisable

within 60

days

   

Number of

shares

beneficially

owned

   

Percentage

of beneficial

ownership

   

Number of

shares

beneficially

owned

   

Percentage

of
beneficial

ownership

 

5% and Greater Stockholders:

           

Entities affiliated with WRVI Capital(1)

    13,662,357             13,662,357       25.5%       13,662,357       22.4%  

Entities affiliated with Igor Khandros, Ph.D.(2)

    11,921,017             11,921,017       22.3%       11,921,017       19.6%  

Entities affiliated with Sequoia Capital(3)

    8,048,014             8,048,014       15.0%       8,048,014       13.2%  

Nikon Corporation(4)

    4,360,713             4,360,713       8.1%       4,360,713       7.2%  

Directors and Named Executive Officers:

           

Eric D. Hobbs, Ph.D.(5)

          1,105,051       1,105,051       2.0%       1,105,051       1.8%  

Shaun M. Holt(6)

          421,875       421,875       *       421,875       *  

Keith J. Breinlinger, Ph.D.(7)

    44,000       491,937       535,937       *       535,937       *  

Sarah Boyce(8)

          100,000       100,000       *       100,000       *  

Igor Khandros, Ph.D.(2)

    11,921,017             11,921,017       22.3%       11,921,017       19.6%  

Michael Marks(9)

    4,136,985             4,136,985       7.7%       4,136,985       6.8%  

Michael Moritz(10)

                      *             *  

Elizabeth Nelson(11)

    50,000       107,500       157,500       *       157,500       *  

James Rothman, Ph.D.(12)

          379,375       379,375       *       379,375       *  

Ming Wu, Ph.D.(13)

    1,200,000             1,200,000       2.2%       1,200,000       2.0%  

Makoto Shintani

                      *             *  

Gregory T. Lucier(14)

                      *             *  

All directors and executive officers as a group (13 persons)

    17,352,002       2,943,238       20,295,240       35.9%       20,295,240       31.8%  

 

 
*   Represents beneficial ownership of less than one percent.

 

(1)   Consists of (i) 6,076,421 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by WRV-BLI LLC, (ii) 2,329,916 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by Walden Riverwood Ventures, L.P., or Walden, (iii) 1,958,787 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by WRV-BLI II, LLC, (iv) 853,242 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by Walden, (v) 742,942 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by WRV II, L.P., (vi) 965,414 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by WRV-BLI III LLC, (vii) 543,980 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by WRV-BLI IV, LLC and (viii) 191,655 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by WRV II, L.P. Walden Riverwood GP, LLC (“Walden GP”) is the general partner of Walden. Michael Marks, a member of our board of directors, and Lip-Bu Tan are members of the investment committee of Walden GP and may be deemed to share voting and dispositive power over the shares held by Walden. WIIG Communications Management LLC (“WIIG”) is the manager of WRV-BLI LLC, WRV-BLI II, LLC, WRV-BLI III LLC and WRV-BLI IV, LLC. Lip-Bu Tan is the sole director of WIIG and may be deemed to have voting and dispositive power over the shares held by WRV-BLI LLC, WRV-BLI II, LLC, WRV-BLI III LLC and WRV-BLI IV, LLC. WRV GP II, LLC, or WRV GP II, is the general partner of WRV II. Lip-Bu Tan, Michael Marks and Nicholas Brathwaite are members of the investment committee of WRV GP II and may be deemed to share voting and dispositive power over the shares held by WRV II. The address for WRVI Capital and for WIIG is One California Street, Suite 1750, San Francisco, CA 94111.

 

(2)   Consists of (i) 250,000 shares of common stock issuable upon the conversion of Series A Preferred Stock directly held by the Khandros 1997 Trust I, or Trust I, (ii) 250,000 shares of common stock issuable upon the conversion of Series A Preferred Stock directly held by the Khandros 1997 Trust II, or Trust II, (iii) 2,500,000 shares of common stock issuable upon the conversion of Series A Preferred Stock directly held by the Khandros-Bloch Revocable Trust U/A/D 1/24/1997, or the Revocable Trust, (iv) 1,250,001 shares of common stock issuable upon the conversion of Series A-1 Preferred Stock directly held by the Revocable Trust, (v) 5,707,762 shares of common stock issuable upon the conversion of Series A-2 Preferred Stock directly held by the Revocable Trust, (vi) 1,926,107 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by the Revocable Trust and (vii) 37,147 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by the Revocable Trust. Igor Khandros, Ph.D., a member of our board of directors, is a trustee of Trust I, Trust II and the Revocable Trust and may be deemed to have sole voting and dispositive power with respect to shares held by Trust I, Trust II and the Revocable Trust.

 

165


Table of Contents
(3)   Consists of (i) 4,550,239 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by the Sequoia Capital U.S. Growth Fund VI, L.P., or US GF VI, (ii) 514,443 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by US GF VI, (iii) 331,774 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by US GF VI, (iv) 227,918 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by Sequoia Capital U.S. Growth VI Principals Fund, L.P., or US GF VI PF, (v) 5,616 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by US GF VI PF, (vi) 3,622 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by US GF VI PF, (vii) 1,690,852 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by Sequoia Capital U.S. Venture Fund XV, L.P., or SC XV, (viii) 184,034 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by SC XV, (ix) 118,687 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by SC XV, (x) 25,597 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by Sequoia Capital U.S. Venture Partners Fund XV, L.P., or STP XV, (xi) 2,786 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by STP XV, (xii) 1,796 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by STP XV, (xiii) 71,263 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by Sequoia Capital U.S. Venture Partners Fund XV (Q), L.P., or STPQ XV, (xiv) 7,756 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by STPQ XV, (xv) 5,002 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by STPQ XV, (xvi) 260,068 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by Sequoia Capital U.S. Venture XV Principals Fund, L.P., or SC XV PF, (xvii) 28,306 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by SC XV PF, and (xviii) 18,255 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by SC XV PF. SC US (TTGP), Ltd. is (i) the general partner of SC U.S. Venture XV Management, L.P., which is the general partner of SC XV, STP XV, STPQ XV, and SC XV PF (collectively, the SC XV Funds); and (ii) the general partner of SC U.S. Growth VI Management, L.P., which is the general partner of US GF VI and US GF VI PF (collectively, the US GF VI Funds). As a result, SC US (TTGP), Ltd. may be deemed to share voting and dispositive power with respect to the shares held by the SC XV Funds and the SC US GF VI Funds. The address of each of these entities is 2800 Sand Hill Road, Suite 101, Menlo Park, California 94025.

 

(4)   Consists of (i) 1,485,884 shares of common stock issuable upon the conversion of Series D Preferred Stock and (ii) 2,874,829 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by Nikon Corporation, or Nikon. The address of Nikon is 2-15-3, Konan, Minato-ku, Tokyo 108-6290, Japan.

 

(5)   Consists of 1,105,051 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 31, 2020.

 

(6)   Consists of shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 31, 2020.

 

(7)   Consists of 44,000 shares of common stock directly held by Dr. Breinlinger and 491,937 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 31, 2020.

 

(8)   Consists of shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 31, 2020, of which 18,750 will be vested within 60 days of March 31, 2020 and 81,250 of which will be subject to the Company’s right of repurchase.

 

(9)   Consists of (i) 2,329,916 shares of common stock issuable upon the conversion of Series B Preferred Stock directly held by Walden, (ii) 853,242 shares of common stock issuable upon the conversion of Series C Preferred Stock directly held by Walden, (iii) 742,942 shares of common stock issuable upon the conversion of Series D Preferred Stock directly held by WRV II, L.P., (iv) 19,230 shares of common stock issuable upon the conversion of Series E convertible preferred stock directly held by the Marks Family Trust, and (v) 191,655 shares of common stock issuable upon the conversion of Series E Preferred Stock directly held by WRV II, L.P. Walden GP is the general partner of Walden. Michael Marks, a member of our board of directors, and Lip-Bu Tan are members of the investment committee of Walden GP and may be deemed to share voting and dispositive power over the shares held by Walden. WRV GP II, LLC, or WRV GP II, is the general partner of WRV II. Lip-Bu Tan, Michael Marks and Nicholas Brathwaite are members of the investment committee of WRV GP II and may be deemed to share voting and dispositive power over the shares held by WRV II. Mr. Marks disclaims beneficial ownership of the shares held by Walden, WRV II, L.P. and the Marks Family Trust except to the extent of his pecuniary interest therein.

 

(10)   Does not include the shares described in footnote (3) above, beneficial ownership of which Mr. Moritz hereby disclaims, except to the extent of his pecuniary interest therein.

 

(11)   Consists of shares of (i) 50,000 shares of common stock directly held by Ms. Nelson as of March 31, 2020, of which 29,531 shares will be vested within 60 days of March 31, 2020, and 20,469 shares will remain subject to the company’s right of repurchase within 60 days of March 31, 2020, and (ii) 107,500 shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 31, 2020, all of which will remain subject to the company’s right of repurchase within 60 days of March 31, 2020.

 

(12)   Consists of shares of common stock that may be acquired pursuant to the exercise of stock options within 60 days of March 31, 2020.

 

(13)   Consists of shares of common stock held by the Wu Revocable Trust dated 2/25/10, of which Dr. Wu is a trustee.

 

(14)   Mr. Lucier joined our board of directors in June 2020.

 

166


Table of Contents

Description of capital stock

General

The following description of our capital stock and certain provisions of our amended and restated certificate of incorporation and amended and restated bylaws are summaries and are qualified by reference to the amended and restated certificate of incorporation and the amended and restated bylaws that will be in effect upon the completion of this offering. Copies of these documents will be filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The descriptions of our common stock and convertible preferred stock reflect changes to our capital structure that will occur immediately prior to the completion of this offering.

Upon the completion of this offering and the filing of our amended and restated certificate of incorporation, our authorized capital stock will consist of 300,000,000 shares of common stock, par value $0.00005 per share, and 10,000,000 shares of preferred stock, par value $0.00005 per share.

Common stock

As of March 31, 2020, we had outstanding 53,543,919 shares of common stock held of record by 113 stockholders, assuming the conversion of all outstanding shares of convertible preferred stock into 50,462,272 shares of common stock in connection with the completion of the offering. In connection with this offering, we expect to consummate a 1-for-2 reverse stock split of our outstanding capital stock.

Holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that we may designate and issue in the future.

In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately our net assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or conversion rights and there are no sinking fund provisions applicable to our common stock. Our outstanding shares of common stock are, and the shares offered by us in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of common stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.

Preferred stock

As of March 31, 2020, there were 50,462,272 shares of our convertible preferred stock outstanding, and 136,519 shares of convertible preferred stock issuable upon exercise of an outstanding warrant to purchase shares of convertible preferred stock. Immediately prior to the completion of this offering, all outstanding shares of our convertible preferred stock will convert into 50,462,272 shares of our common stock, and our outstanding warrant to purchase shares of convertible preferred stock will convert into a warrant to purchase 136,519 shares of our common stock.

Under the terms of our amended and restated certificate of incorporation that will become effective upon the completion of this offering, our board of directors is authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval.

 

167


Table of Contents

Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges, sinking fund terms and liquidation preferences, of each series of preferred stock.

The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Upon the completion of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.

Options

As of March 31, 2020, options to purchase 10,456,747 shares of our common stock were outstanding under our equity compensation plans, of which 4,860,277 options were vested as of that date.

Warrants

As of March 31, 2020, 136,519 shares of convertible preferred stock were issuable upon exercise of an outstanding warrant to purchase shares of convertible preferred stock, at an exercise price of $5.86 per share. Immediately prior to the completion of this offering, this warrant to purchase shares of convertible preferred stock will convert into a warrant to purchase 136,519 shares of our common stock.

Registration rights

Our Investors’ Rights Agreement grants the parties thereto certain registration rights in respect of the “registrable securities” held by them, which securities include shares of our common stock issued upon the conversion of shares of our convertible preferred stock; any shares of our common stock issued as a dividend or other distribution with respect to the shares described in the foregoing clause; and the shares of our common stock issued upon conversion or exercise of any convertible security then outstanding. The registration of shares of our common stock pursuant to the exercise of these registration rights would enable the holders thereof to sell such shares without restriction under the Securities Act when the applicable registration statement is declared effective. Under the Investors’ Rights Agreement, we will pay all expenses relating to such registrations, including the reasonable fees and disbursements of one counsel for the participating holders not to exceed $30,000 per transaction, and the holders will pay all underwriting discounts and commissions relating to the sale of their shares on a pro rata basis. The Investors’ Rights Agreement also includes customary indemnification and procedural terms.

Holders of 50,462,272 shares of our common stock issuable upon the conversion of our convertible preferred stock are entitled to such registration rights pursuant to the Investors’ Rights Agreement. These registration rights will expire on the earlier of the date that is five years after the completion of this offering or, with respect to each stockholder following the completion of this offering, at such time as such stockholder can sell all of its registrable securities pursuant to Rule 144(b)(1)(i) of the Securities Act or holds one percent or less of our outstanding common stock and all of such stockholder’s registrable securities can be sold in any three month period without registration pursuant to Rule 144 of the Securities Act.

In addition, TriplePoint Capital LLC, or TriplePoint, is entitled to certain registration rights with respect to the shares of capital stock issuable upon exercise of our outstanding warrant described above under “—Warrants.”

 

168


Table of Contents

Demand registration rights

At any time beginning 180 days after the completion of this offering, certain holders of a majority of the registrable securities then outstanding may, on not more than two occasions, request that we prepare, file and maintain a registration statement to register registrable securities then outstanding if the anticipated aggregate offering price is at least $25 million. Once we are eligible to use a registration statement on Form S-3, certain holders of the registrable securities then outstanding as well as TriplePoint may request that we prepare, file and maintain a registration statement on Form S-3 covering the sale of their registrable securities, but only if the anticipated offering price is at least $5 million.

Piggyback registration rights

In the event that we propose to register any of our securities under the Securities Act, either for our own account or for the account of other security holders, the stockholders party to the Investors’ Rights Agreement as well as TriplePoint will be entitled to certain “piggyback” registration rights allowing them to include their registrable securities in such registration, subject to certain customary marketing and other limitations.

As a result, whenever we propose to file a registration statement under the Securities Act other than with respect to a demand registration or a registration statement on Form S-4 or S-8, these holders will be entitled to notice of the registration and will have the right to include their registrable securities in the registration subject to certain limitations.

Anti-takeover provisions

Amended and restated certificate of incorporation and amended and restated bylaws

Because our stockholders do not have cumulative voting rights, our stockholders holding a majority of the voting power of our shares of common stock outstanding will be able to elect all of our directors. Our amended and restated certificate of incorporation and amended and restated bylaws to be effective upon the completion of this offering will provide that all stockholder actions must be effected at a duly called meeting of stockholders and not by consent in writing. A special meeting of stockholders may be called only by a majority of our board of directors, the chair of our board of directors or our chief executive officer.

Our amended and restated certificate of incorporation will further provide that, immediately after this offering, the affirmative vote of holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of voting stock, voting as a single class, will be required to amend certain provisions of our certificate of incorporation, including provisions relating to the size of the board, removal of directors, special meetings, actions by written consent and cumulative voting. The affirmative vote of holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then outstanding shares of voting stock, voting as a single class, will be required to amend or repeal our bylaws, although our bylaws may be amended by a simple majority vote of our board of directors.

Our amended and restated certificate of incorporation will further provide that our board of directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms.

Finally, our amended and restated certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of us; (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees or agents to us or our stockholders; (iii) any action asserting a claim against us arising pursuant to any provision of the Delaware General Corporation Law or our amended and restated certificate of incorporation or amended and restated bylaws; or (iv) any action asserting a claim against us governed by the internal affairs doctrine; provided that, the exclusive forum provision will not apply to suits brought to enforce

 

169


Table of Contents

any liability or duty created by the Exchange Act or any other claim for which the federal courts have exclusive jurisdiction; and provided further that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation will also provide that the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. We note that investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder.

The foregoing provisions will make it more difficult for our existing stockholders to replace our board of directors as well as for another party to obtain control of our Company by replacing our board of directors. Since our board of directors has the power to retain and discharge our officers, these provisions could also make it more difficult for existing stockholders or another party to effect a change in management. In addition, the authorization of undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to change the control of our Company.

These provisions are intended to enhance the likelihood of continued stability in the composition of our board of directors and its policies and to discourage certain types of transactions that may involve an actual or threatened acquisition of our Company. These provisions are also designed to reduce our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy rights. However, these provisions could have the effect of discouraging others from making tender offers for our shares and may have the effect of deterring hostile takeovers or delaying changes in control of our Company or our management. As a consequence, these provisions also may inhibit fluctuations in the market price of our stock that could result from actual or rumored takeover attempts.

Section 203 of the Delaware General Corporation Law

We are subject to Section 203 of the Delaware General Corporation Law, which prohibits a Delaware corporation from engaging in any business combination with any interested stockholder for a period of three years after the date that such stockholder became an interested stockholder, with the following exceptions:

 

 

before such date, the board of directors of the corporation approved either the business combination or the transaction that resulted in the stockholder becoming an interested stockholder;

 

 

upon closing of the transaction that resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction began, excluding for purposes of determining the voting stock outstanding (but not the outstanding voting stock owned by the interested stockholder) those shares owned by (1) persons who are directors and also officers and (2) employee stock plans in which employee participants do not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or

 

 

on or after such date, the business combination is approved by the board of directors and authorized at an annual or special meeting of the stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder.

 

170


Table of Contents

In general, Section 203 defines business combination to include the following:

 

 

any merger or consolidation involving the corporation and the interested stockholder;

 

 

any sale, transfer, pledge or other disposition of 10% or more of the assets of the corporation involving the interested stockholder;

 

 

subject to certain exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;

 

 

any transaction involving the corporation that has the effect of increasing the proportionate share of the stock or any class or series of the corporation beneficially owned by the interested stockholder; or

 

 

the receipt by the interested stockholder of the benefit of any loss, advances, guarantees, pledges or other financial benefits by or through the corporation.

In general, Section 203 defines an “interested stockholder” as an entity or person who, together with the person’s affiliates and associates, beneficially owns, or within three years prior to the time of determination of interested stockholder status did own, 15% or more of the outstanding voting stock of the corporation.

Limitations on liability and indemnification

See the section of this prospectus titled “Certain relationships and related party transactions—Limitation on liability and indemnification.”

Transfer agent and registrar

The transfer agent and registrar for our common stock is American Stock Transfer & Trust Company, LLC. The transfer agent and registrar’s address is 6201 15th Avenue, Brooklyn, New York 11219.

Listing

We have applied to have our common stock listed on the Nasdaq Global Market under the trading symbol “BLI.”

 

171


Table of Contents

Shares eligible for future sale

Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

Based on the number of shares of our common stock outstanding as of March 31, 2020, upon the completion of this offering and assuming (1) the conversion of all shares of our outstanding convertible preferred stock at March 31, 2020, (2) no exercise of the underwriters’ option to purchase additional shares of common stock and (3) no exercise of any of our other outstanding stock options or warrants, we will have outstanding an aggregate of approximately 60,943,919 shares of common stock. Of these shares, all of the shares of common stock to be sold in this offering, and any shares sold upon exercise of the underwriters’ option to purchase additional shares, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless the shares are held by any of our “affiliates” as such term is defined in Rule 144 of the Securities Act. All remaining shares of common stock held by existing stockholders immediately prior to the consummation of this offering will be “restricted securities” as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, which rules are summarized below.

As a result of the market stand-off provisions and lock-up agreements described below and the provisions of Rules 144 and 701 under the Securities Act, the shares of common stock that will be deemed restricted securities after this offering will be available for sale in the public market as follows:

 

 

no shares will be available for sale until 180 days after the date of this prospectus, subject to certain limited exceptions provided for in the lock-up agreements; and

 

 

53,543,919 shares will be eligible for sale beginning more than 180 days after the date of this prospectus, subject, in the case of shares held by our affiliates, to the volume limitations under Rule 144.

Rule 144

Affiliate resales of restricted securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially owned shares of our common stock for at least six months would be entitled to sell in a “broker’s transaction” or certain a “riskless principal transaction” or to market makers, a number of shares within any three-month period that does not exceed the greater of:

 

 

1% of the number of shares of our common stock then outstanding, which will equal approximately 609,439 shares of our common stock immediately after this offering; or

 

 

the average weekly trading volume in shares of our common stock on the Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.

Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being sold under Rule 144 by an affiliate during any three-month period

 

172


Table of Contents

exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC and Nasdaq concurrently with either the placing of a sale order with the broker or the execution directly with a market maker.

Non-affiliate resales of restricted securities

In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public company requirement and the current public information requirement. Non-affiliate resales are not subject to the manner of sale, volume limitation or notice filing provisions of Rule 144.

Rule 701

In general, under Rule 701, any of an issuer’s employees, directors, officers, consultants or advisors who purchases shares from the issuer in connection with a compensatory stock or option plan or other written agreement before the effective date of a registration statement under the Securities Act is entitled to sell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of the issuer can resell shares in reliance on Rule 144 without having to comply with the holding period requirement, and non-affiliates of the issuer can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.

Lock-up agreements and market stand-off provisions

In connection with this offering, we, our officers and directors and the holders of substantially all of our common stock, stock options, and other securities convertible into, exercisable or exchangeable for our common stock have each entered into a lock-up agreement with the underwriters of this offering that restricts, subject to certain exceptions, the sale of shares of our common stock by those parties for a period of 180 days after the date of this prospectus without the prior written consent of J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC. J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, on behalf of the underwriters, may, in their sole discretion, choose to release any or all of the shares of our common stock subject to these lock-up agreements at any time prior to the expiration of the lock-up period without notice. For more information, see the section titled “Underwriting.” All of our option holders are subject to a market stand-off agreement with us, which imposes similar restrictions.

Equity plans

We intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of common stock subject to outstanding stock options, as well as shares of common stock to be issued under our 2020 Plan and ESPP. We expect to file the registration statement covering shares offered pursuant to the 2020 Plan and ESPP shortly after the date of this prospectus, permitting the resale of such shares by non-affiliates in the public market without restriction under the Securities Act and the sale by affiliates in the public market, subject to compliance with the resale provisions of Rule 144 and expiration or release from the terms of the lock-up agreements described above.

 

173


Table of Contents

Registration rights

Upon the completion of this offering, the holders of approximately 50,462,272 shares of our common stock and the holder of our outstanding warrant to purchase 136,519 shares of our common stock, or their permitted transferees, will be entitled to various rights with respect to the registration of these shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration, except for shares purchased by affiliates. See the section titled “Description of capital stock—Registration rights” for additional information.

 

174


Table of Contents

Material U.S. federal income tax consequences to Non-U.S. Holders

The following discussion is a summary of the material U.S. federal income tax consequences to Non-U.S. Holders (as defined below) of the purchase, ownership and disposition of our common stock issued pursuant to this offering but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax laws, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the U.S. Internal Revenue Code of 1986, as amended, or the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the U.S. Internal Revenue Service, or the IRS, in each case in effect as of the date hereof. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a Non-U.S. Holder. We have not sought and will not seek any rulings from the IRS regarding the matters discussed below. There can be no assurance the IRS or a court will not take a contrary position to that discussed below regarding the tax consequences of the purchase, ownership and disposition of our common stock.

This discussion is limited to Non-U.S. Holders that hold our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all U.S. federal income tax consequences relevant to a Non-U.S. Holder’s particular circumstances, including the impact of the alternative minimum tax or the Medicare contribution tax on net investment income. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:

 

 

U.S. expatriates and former citizens or long-term residents of the United States;

 

 

persons holding our common stock as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

 

 

banks, insurance companies and other financial institutions;

 

 

brokers, dealers or traders in securities;

 

 

“controlled foreign corporations,” “passive foreign investment companies” and corporations that accumulate earnings to avoid U.S. federal income tax;

 

 

partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

 

 

tax-exempt organizations or governmental organizations;

 

 

persons deemed to sell our common stock under the constructive sale provisions of the Code;

 

 

tax-qualified retirement plans; and

 

 

“qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds.

If an entity or other arrangement treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of a partner in the partnership will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding our common stock and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF

 

175


Table of Contents

THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Definition of Non-U.S. Holder

For purposes of this discussion, a “Non-U.S. Holder” is any beneficial owner of our common stock that is neither a “U.S. person” nor an entity treated as a partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

 

 

an individual who is a citizen or resident of the United States;

 

 

a corporation for U.S. federal tax purposes created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

 

an estate the income of which is subject to U.S. federal income tax regardless of its source; or

 

 

a trust that (i) is subject to the primary supervision of a U.S. court and one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code) have the authority to control substantial decisions of the trust, or (ii) has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

Distributions

As described in the section of this prospectus titled “Dividend policy,” we do not currently intend to pay any cash dividends on our common stock in the foreseeable future. However, if we do make distributions of cash or property on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a Non-U.S. Holder’s adjusted tax basis in its common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “—Sale or other taxable disposition.”

Subject to the discussion below regarding effectively connected income, dividends paid to a Non-U.S. Holder will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable tax treaty, provided the Non-U.S. Holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A Non-U.S. Holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable tax treaties.

If dividends paid to a Non-U.S. Holder are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such dividends are attributable), the Non-U.S. Holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the Non-U.S. Holder must furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States.

Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable tax treaty) on such effectively connected dividends,

 

176


Table of Contents

as adjusted for certain items. Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Sale or other taxable disposition

Subject to the discussion below regarding backup withholding, a Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our common stock unless:

 

 

the gain is effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable tax treaty, the Non-U.S. Holder maintains a permanent establishment in the United States to which such gain is attributable);

 

 

the Non-U.S. Holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition and certain other requirements are met; or

 

 

our common stock constitutes a U.S. real property interest (USRPI), by reason of our status as a U.S. real property holding corporation (USRPHC), for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding such disposition of such holder’s holding period.

Gain described in the first bullet point above generally will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A Non-U.S. Holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable tax treaty) on such effectively connected gain, as adjusted for certain items.

Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable tax treaty), which may be offset by certain U.S. source capital losses of the Non-U.S. Holder (even though the individual is not considered a resident of the United States), provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a Non-U.S. Holder will not be subject to U.S. federal income tax if our common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such Non-U.S. Holder owned, actually and constructively, 5% or less of our common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the Non-U.S. Holder’s holding period.

Non-U.S. Holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

Information reporting and backup withholding

Payments of dividends on our common stock will not be subject to backup withholding, provided the Non-U.S. Holder certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any distributions on our common stock paid to the Non-U.S. Holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to

 

177


Table of Contents

backup withholding or information reporting if the applicable withholding agent receives the certification described above or the Non-U.S. Holder otherwise establishes an exemption. Proceeds of a disposition of our common stock conducted through a non-U.S. office of a non-U.S. broker that does not have certain enumerated relationships with the United States generally will not be subject to backup withholding or information reporting.

Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides or is established.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a Non-U.S. Holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Additional withholding tax on payments made to foreign accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) on certain types of payments made to non-U.S. financial institutions and certain other non-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on, or (subject to the proposed Treasury Regulations discussed below) gross proceeds from the sale or other disposition of, our common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (i) the foreign financial institution undertakes certain diligence and reporting obligations, (ii) the non-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (iii) the foreign financial institution or non-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in (i) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our common stock. While, beginning on January 1, 2019, withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of our common stock, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our common stock.

 

178


Table of Contents

Underwriting

We are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Cowen and Company, LLC are acting as joint book-running managers of the offering and as representatives of the underwriters. We have entered into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

 

   
Name   

Number of

shares

 

J.P. Morgan Securities LLC

                       

Morgan Stanley & Co. LLC

  

Cowen and Company, LLC

  

William Blair & Company, L.L.C.

  
  

 

 

 

Total

     7,400,000  

 

  

 

 

 

The underwriters are committed to purchase all the common shares offered by us if they purchase any shares. The underwriting agreement also provides that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

The underwriters propose to offer the common shares directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $                 per share. After the initial offering of the shares to the public, if all of the common shares are not sold at the initial public offering price, the underwriters may change the offering price and the other selling terms. Sales of any shares made outside of the United States may be made by affiliates of the underwriters.

The underwriters have an option to buy up to 1,110,000 additional shares of common stock from us to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option to purchase additional shares. If any shares are purchased with this option to purchase additional shares, the underwriters will purchase shares in approximately the same proportion as shown in the table above. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

The underwriters do not expect to sell more than 5% of the shares of common stock in the aggregate to accounts over which they exercise discretionary authority.

The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $                 per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.

 

     
      Without
option to
purchase
additional
shares
exercise
     With full
option to
purchase
additional
shares
exercise
 

Per Share

   $                    $                

Total

   $        $    

 

 

 

179


Table of Contents

We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and commissions, will be approximately $3,000,000. We have also agreed to reimburse the underwriters for reasonable fees and expenses of counsel related to the review by the Financial Industry Regulatory Authority of the terms of sale of the shares of common stock offered hereby in an amount not to exceed $40,000.

A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

We have agreed that we will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, or submit to, or file with, the Securities and Exchange Commission a registration statement under the Securities Act of 1933, or the Securities Act, relating to, any shares of our common stock or securities convertible into or exercisable or exchangeable for any shares of our common stock, or publicly disclose the intention to make any offer, sale, pledge, loan, disposition or filing, or (ii) enter into any swap or other arrangement that transfers all or a portion of the economic consequences associated with the ownership of any shares of common stock or any such other securities (regardless of whether any of these transactions are to be settled by the delivery of shares of common stock or such other securities, in cash or otherwise), in each case without the prior written consent of J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC for a period of 180 days after the date of this prospectus, other than the shares of our common stock to be sold in this offering.

Our directors and executive officers, and the holders of substantially all of our common stock, stock options, and other securities convertible into, exercisable or exchangeable for our common stock (such persons, the “lock-up parties”) have entered into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each lock-up party, with limited exceptions, for a period of 180 days after the date of this prospectus (such period, the “restricted period”), may not (and may not cause any of their direct or indirect affiliates to), without the prior written consent of J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for our common stock (including, without limitation, common stock or such other securities which may be deemed to be beneficially owned by such lock-up parties in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant (collectively with the common stock, the “lock-up securities”), (2) enter into any hedging, swap or other agreement or transaction that transfers, in whole or in part, any of the economic consequences of ownership of the lock-up securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of lock-up securities, in cash or otherwise, (3) make any demand for, or exercise any right with respect to, the registration of any lock-up securities, or (4) publicly disclose the intention to do any of the foregoing. Such persons or entities have further acknowledged that these undertakings preclude them from engaging in any hedging or other transactions or arrangements (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) designed or intended, or which could reasonably be expected to lead to or result in, a sale or disposition or transfer (by any person or entity, whether or not a signatory to such agreement) of any economic consequences of ownership, in whole or in part, directly or indirectly, of any lock-up securities, whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of lock-up securities, in cash or otherwise.

 

180


Table of Contents

The restrictions described in the immediately preceding paragraph and contained in the lock-up agreements between the underwriters and the lock-up parties do not apply, subject in certain cases to various conditions, to certain transactions, including (a) transfers of lock-up securities: (i) as bona fide gifts, or for bona fide estate planning purposes, (ii) by will, other testamentary document or intestacy, (iii) to any trust for the direct or indirect benefit of the lock-up party or any immediate family member, (iv) to a partnership, limited liability company or other entity of which the lock-up party and its immediate family members are the legal and beneficial owner of all of the outstanding equity securities or similar interests, (v) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (iv), (vi) in the case of a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate of the lock-up party, or to any investment fund or other entity controlling, controlled by, managing or managed by or under common control with the lock-up party or its affiliates or (B) as part of a distribution to members, partners or stockholders of the lock-up party; (vii) by operation of law, (viii) to us from an employee or other service provider upon death, disability or termination of service of such person, (ix) as part of a sale of lock-up securities acquired from the underwriters in this offering or in open market transactions after the date of this prospectus, (x) to us in connection with the vesting, settlement or exercise of restricted stock units, options, warrants or other rights to purchase shares of our common stock (including “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments, or (xi) pursuant to a bona fide third party tender offer, merger, consolidation or other similar transaction approved by our board of directors and made to all stockholders involving a change in control, provided that if such transaction is not completed, all such lock-up securities would remain subject to the restrictions in the immediately preceding paragraph; (b) exercise of the options, settlement of RSUs or other equity awards, or the exercise of warrants granted pursuant to plans or agreements described in this prospectus, provided that any lock-up securities received upon such exercise, vesting or settlement would be subject to restrictions similar to those in the immediately preceding paragraph; (c) the conversion of outstanding preferred stock, warrants to acquire preferred stock, or convertible securities into shares of our common stock or warrants to acquire shares of our common stock, provided that any common stock or warrant received upon such conversion would be subject to restrictions similar to those in the immediately preceding paragraph; and (d) the establishment by lock-up parties of trading plans under Rule 10b5-1 under the Exchange Act, provided that such plan does not provide for the transfer of lock-up securities during the restricted period.

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, in their sole discretion, may release the securities subject to any of the lock-up agreements with the underwriters described above, in whole or in part at any time.

Substantially all of the record holders of our outstanding securities convertible into, exercisable or exchangeable for our common stock are subject to the restrictions on the sale, transfer, short sale, hedging, or other disposition of their equity interests imposed by either the lock-up agreements described above or market stand-off provisions in agreements with us.

We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act.

We have applied to have our common stock listed on the Nasdaq Global Market under the trading symbol “BLI.”

In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this offering is in progress. These stabilizing transactions may include making short sales of common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be

 

181


Table of Contents

“covered” shorts, which are short positions in an amount not greater than the underwriters’ option to purchase additional shares referred to above, or may be “naked” shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the option to purchase additional shares. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the Nasdaq Global Market, in the over-the-counter market or otherwise.

Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

 

 

the information set forth in this prospectus and otherwise available to the representatives;

 

 

our prospects and the history and prospects for the industry in which we compete;

 

 

an assessment of our management;

 

 

our prospects for future earnings;

 

 

the general condition of the securities markets at the time of this offering;

 

 

the recent market prices of, and demand for, publicly-traded common stock of generally comparable companies; and

 

 

other factors deemed relevant by the underwriters and us.

Neither we nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.

Other relationships

Certain of the underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

 

182


Table of Contents

Selling restrictions

General

Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Notice to prospective investors in Canada

The shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Notice to prospective investors in the European Economic Area and United Kingdom

In relation to each Member State of the European Economic Area and the United Kingdom (each, a “Relevant State”), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Relevant State at any time under the following exemptions under the Prospectus Regulation:

 

(a)   to any legal entity which is a qualified investor as defined under the Prospectus Regulation;

 

(b)   to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters; or

 

(c)   in any other circumstances falling within Article 1(4) of the Prospectus Regulation,

 

183


Table of Contents

provided that no such offer of shares shall require us or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and us that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation. In the case of any shares being offered to a financial intermediary as that term is used in the Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters have been obtained to each such proposed offer or resale.

For the purposes of this provision, the expression an “offer to the public” in relation to shares in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.

Notice to prospective investors in the United Kingdom

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”) or otherwise in circumstances which have not resulted and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the Financial Services and Markets Act 2000.

Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons.

Notice to prospective investors in Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document does not constitute a prospectus within the meaning of, and has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, the Company, the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

 

184


Table of Contents

Notice to prospective investors in Australia

This prospectus:

 

 

does not constitute a disclosure document or a prospectus under Chapter 6D.2 of the Corporations Act 2001 (Cth) (the “Corporations Act”);

 

 

has not been, and will not be, lodged with the Australian Securities and Investments Commission (“ASIC”), as a disclosure document for the purposes of the Corporations Act and does not purport to include the information required of a disclosure document for the purposes of the Corporations Act; and

 

 

may only be provided in Australia to select investors who are able to demonstrate that they fall within one or more of the categories of investors, available under section 708 of the Corporations Act (“Exempt Investors”).

The shares may not be directly or indirectly offered for subscription or purchased or sold, and no invitations to subscribe for or buy the shares may be issued, and no draft or definitive offering memorandum, advertisement or other offering material relating to any shares may be distributed in Australia, except where disclosure to investors is not required under Chapter 6D of the Corporations Act or is otherwise in compliance with all applicable Australian laws and regulations. By submitting an application for the shares, you represent and warrant to us that you are an Exempt Investor.

As any offer of shares under this document will be made without disclosure in Australia under Chapter 6D.2 of the Corporations Act, the offer of those securities for resale in Australia within 12 months may, under section 707 of the Corporations Act, require disclosure to investors under Chapter 6D.2 if none of the exemptions in section 708 applies to that resale. By applying for the shares you undertake to us that you will not, for a period of 12 months from the date of issue of the shares, offer, transfer, assign or otherwise alienate those shares to investors in Australia except in circumstances where disclosure to investors is not required under Chapter 6D.2 of the Corporations Act or where a compliant disclosure document is prepared and lodged with ASIC.

Notice to prospective investors in Japan

The shares have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.

Notice to prospective investors in Hong Kong

The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) of Hong Kong and any rules made thereunder; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong) (the “CO”) or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.

 

185


Table of Contents

Notice to prospective investors in Singapore

Singapore SFA Product Classification — In connection with Section 309B of the SFA and the CMP Regulations 2018, unless otherwise specified before an offer of shares, we have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the shares are “prescribed capital markets products” (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).

Each underwriter has acknowledged that this prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each underwriter has represented and agreed that it has not offered or sold any shares or caused the shares to be made the subject of an invitation for subscription or purchase and will not offer or sell any shares or cause the shares to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares, whether directly or indirectly, to any person in Singapore other than:

 

(a)   to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA;

 

(b)   to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA and in accordance with the conditions specified in Section 275 of the SFA; or

 

(c)   otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:

 

(a)   a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

 

(b)   a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:

 

  (i)   to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 276(4)(i)(B) of the SFA;

 

  (ii)   where no consideration is or will be given for the transfer;

 

  (iii)   where the transfer is by operation of law;

 

  (iv)   as specified in Section 276(7) of the SFA; or

 

  (v)   as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.

 

186


Table of Contents

Notice to prospective investors in China

This prospectus will not be circulated or distributed in the PRC and the shares will not be offered or sold, and will not be offered or sold to any person for re-offering or resale directly or indirectly to any residents of the PRC except pursuant to any applicable laws and regulations of the PRC. Neither this prospectus nor any advertisement or other offering material may be distributed or published in the PRC, except under circumstances that will result in compliance with applicable laws and regulations.

Notice to prospective investors in Korea

The shares have not been and will not be registered under the Financial Investments Services and Capital Markets Act of Korea and the decrees and regulations thereunder (the “FSCMA”), and the shares have been and will be offered in Korea as a private placement under the FSCMA. None of the shares may be offered, sold or delivered directly or indirectly, or offered or sold to any person for re-offering or resale, directly or indirectly, in Korea or to any resident of Korea except pursuant to the applicable laws and regulations of Korea, including the FSCMA and the Foreign Exchange Transaction Law of Korea and the decrees and regulations thereunder (the “FETL”). The shares have not been listed on any of securities exchanges in the world including, without limitation, the Korea Exchange in Korea. Furthermore, the purchaser of the shares shall comply with all applicable regulatory requirements (including but not limited to requirements under the FETL) in connection with the purchase of the shares. By the purchase of the shares, the relevant holder thereof will be deemed to represent and warrant that if it is in Korea or is a resident of Korea, it purchased the shares pursuant to the applicable laws and regulations of Korea.

Notice to prospective investors in Taiwan

The shares have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant securities laws and regulations and may not be sold, issued or offered within Taiwan through a public offering or in circumstances which constitutes an offer within the meaning of the Securities and Exchange Act of Taiwan that requires a registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorised to offer, sell, give advice regarding or otherwise intermediate the offering and sale of the shares in Taiwan.

Notice to prospective investors in Saudi Arabia

This document may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations as issued by the board of the Saudi Arabian Capital Market Authority (“CMA”) pursuant to resolution number 2-11-2004 dated 4 October 2004 as amended by resolution number 1-28-2008, as amended (the “CMA Regulations”). The CMA does not make any representation as to the accuracy or completeness of this document and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this document. Prospective purchasers of the securities offered hereby should conduct their own due diligence on the accuracy of the information relating to the securities. If you do not understand the contents of this document, you should consult an authorized financial advisor.

Notice to prospective investors in the Dubai International Financial Centre (“DIFC”)

This document relates to an Exempt Offer in accordance with the Markets Rules 2012 of the Dubai Financial Services Authority (“DFSA”). This document is intended for distribution only to persons of a type specified in the Markets Rules 2012 of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not

 

187


Table of Contents

approved this prospectus supplement nor taken steps to verify the information set forth herein and has no responsibility for this document. The securities to which this document relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the securities offered should conduct their own due diligence on the securities. If you do not understand the contents of this document you should consult an authorized financial advisor.

In relation to its use in the DIFC, this document is strictly private and confidential and is being distributed to a limited number of investors and must not be provided to any person other than the original recipient, and may not be reproduced or used for any other purpose. The interests in the securities may not be offered or sold directly or indirectly to the public in the DIFC.

Notice to prospective investors in the United Arab Emirates

The shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the DIFC) other than in compliance with the laws of the United Arab Emirates (and the DIFC) governing the issue, offering and sale of securities. Further, this prospectus does not constitute a public offer of securities in the United Arab Emirates (including the DIFC) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority or the DFSA.

Notice to prospective investors in Bermuda

Shares may be offered or sold in Bermuda only in compliance with the provisions of the Investment Business Act of 2003 of Bermuda which regulates the sale of securities in Bermuda. Additionally, non-Bermudian persons (including companies) may not carry on or engage in any trade or business in Bermuda unless such persons are permitted to do so under applicable Bermuda legislation.

Notice to prospective investors in the British Virgin Islands

The shares are not being, and may not be offered to the public or to any person in the British Virgin Islands for purchase or subscription by or on behalf of the Company. The shares may be offered to companies incorporated under the BVI Business Companies Act, 2004 (British Virgin Islands), “BVI Companies”), but only where the offer will be made to, and received by, the relevant BVI Company entirely outside of the British Virgin Islands.

 

188


Table of Contents

Notice to prospective investors in South Africa

Due to restrictions under the securities laws of South Africa, no “offer to the public” (as such term is defined in the South African Companies Act, No. 71 of 2008 (as amended or re-enacted) (the “South African Companies Act”)) is being made in connection with the issue of the shares in South Africa. Accordingly, this document does not, nor is it intended to, constitute a “registered prospectus” (as that term is defined in the South African Companies Act) prepared and registered under the South African Companies Act and has not been approved by, and/or filed with, the South African Companies and Intellectual Property Commission or any other regulatory authority in South Africa. The shares are not offered, and the offer shall not be transferred, sold, renounced or delivered, in South Africa or to a person with an address in South Africa, unless one or other of the following exemptions stipulated in section 96 (1) applies:

 

Section 96 (1)(a)   

the offer, transfer, sale, renunciation or delivery is to:

 

(i)  persons whose ordinary business, or part of whose ordinary business, is to deal in securities, as principal or agent;

 

(ii)   the South African Public Investment Corporation;

 

(iii)  persons or entities regulated by the Reserve Bank of South Africa;

 

(iv)  authorised financial service providers under South African law;

 

(v)   financial institutions recognised as such under South African law;

 

(vi)  a wholly-owned subsidiary of any person or entity contemplated in (c), (d) or (e), acting as agent in the capacity of an authorised portfolio manager for a pension fund, or as manager for a collective investment scheme (in each case duly registered as such under South African law); or

 

(vii) any combination of the person in (i) to (vi); or

Section 96 (1)(b)    the total contemplated acquisition cost of the securities, for any single addressee acting as principal is equal to or greater than ZAR1,000,000 or such higher amount as may be promulgated by notice in the Government Gazette of South Africa pursuant to section 96(2)(a) of the South African Companies Act.

Information made available in this prospectus should not be considered as “advice” as defined in the South African Financial Advisory and Intermediary Services Act, 2002.

Notice to prospective investors in Israel

This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, (the “Israeli Securities Law”), and has not been filed with or approved by the Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, and any offer of the shares of common stock is directed only at, (i) a limited number of persons in accordance with the Israeli Securities Law and (ii) investors listed in the first addendum (the “Addendum”), to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case, purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors are required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.

 

189


Table of Contents

Legal matters

The validity of the issuance of our common stock offered in this prospectus will be passed upon for us by Latham & Watkins LLP, Menlo Park, California. Davis Polk & Wardwell LLP, Menlo Park, California, is acting as counsel for the underwriters in connection with this offering.

Experts

The consolidated financial statements of Berkeley Lights, Inc. as of December 31, 2018 and 2019, and for each of the years in the two-year period ended December 31, 2019, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing. The audit report covering the December 31, 2019 consolidated financial statements refers to a change in the accounting for leases upon the adoption of Accounting Standards Update (ASU) 2016-02, Leases.

Where you can find more information

We have filed with the SEC, a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and schedules filed therewith. For further information with respect to Berkeley Lights, Inc. and the shares of common stock offered hereby, reference is made to the registration statement and the exhibits and schedules filed therewith. Statements contained in this prospectus regarding the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed as an exhibit to the registration statement. The SEC maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. The address is www.sec.gov.

Upon consummation of this offering, we will become subject to the information and periodic reporting requirements of the Exchange Act and, in accordance therewith, will file periodic reports, proxy statements and other information with the SEC. Such periodic reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We maintain a website at www.berkeleylights.com. Upon consummation of this offering, you may access our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act with the SEC free of charge at our website as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. The reference to our website address does not constitute incorporation by reference of the information contained on our website, and you should not consider information on our website to be part of this prospectus.

You may also request a copy of these filings, at no cost to you, by writing or telephoning us at the following address:

Berkeley Lights, Inc.

5858 Horton Street, Suite 320

Emeryville, California 94608

Attention: General Counsel

(510) 858-2855

 

190


Table of Contents

Berkeley Lights, Inc.

Index to consolidated financial statements

 

     Page(s)  

Report of Independent Registered Public Accounting Firm

     F-2  

Consolidated balance sheets

     F-3  

Consolidated statements of operations and comprehensive loss

     F-4  

Consolidated statements of changes in stockholders’ equity

     F-5  

Consolidated statements of cash flows

     F-6  

Notes to consolidated financial statements

     F-7  

 

F-1


Table of Contents

When the transaction referred to in note 19C of the consolidated financial statements has been consummated, we will be in a position to render the following report.

/s/ KPMG LLP

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Berkeley Lights, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Berkeley Lights, Inc. and subsidiary (the Company) as of December 31, 2018 and 2019, the related consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flows for each of the years in the two-year period ended December 31, 2019, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Change in Accounting Principles

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases effective January 1, 2019 due to the adoption of Accounting Standards Update (ASU) 2016-02, Leases, and the related accounting standard updates.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2015.

San Francisco, California

April 17, 2020, except as to note 19C, which is as of                 , 2020

 

F-2


Table of Contents

Berkeley Lights, Inc.

Consolidated balance sheets

 

       
     December 31,     March 31,     Pro forma
March 31,
2020
 
     2018     2019     2020  
(In thousands, except share and per share data)                  (unaudited)    

(unaudited)

(Note 2)

 
Assets         

Current assets:

        

Cash and cash equivalents

   $ 99,617     $ 81,033     $ 70,306    

Trade accounts receivable

     11,723       9,334       10,021    

Inventory

     2,866       7,181       10,678    

Prepaid expenses and other current assets

     4,789       7,799       7,245    
  

 

 

 

Total current assets

     118,995       105,347       98,250    

Restricted cash

     270       270       270    

Property and equipment, net

     14,104       16,472       15,865    

Operating lease right-of-use assets

           7,785       7,317    

Other assets

     450       1,135       1,076    
  

 

 

 

Total assets

   $ 133,819     $ 131,009     $ 122,778    
  

 

 

 
Liabilities and Stockholders’ Equity         

Current liabilities:

        

Trade accounts payable

   $ 2,702     $ 3,239     $ 4,366    

Accrued expenses and other current liabilities

     3,164       6,229       6,528    

Current portion of notes payable

           5,765          

Deferred revenue

     9,482       9,686       7,745    
  

 

 

 

Total current liabilities

     15,348       24,919       18,639    

Notes payable, net of current portion

     19,763       14,062       19,843    

Deferred revenue, net of current portion

     31       1,461       1,376    

Lease liability, long term

           6,784       6,240    

Other non-current liabilities

     1,046                
  

 

 

 

Total liabilities

     36,188       47,226       46,098    
  

 

 

 

Commitments and contingencies (Note 14)

        

Stockholders’ equity:

        

Convertible preferred stock, $0.00005 par value. Authorized 101,648,657 shares at December 31, 2018 and 2019 and March 31, 2020 (unaudited), respectively; issued and outstanding 50,462,272 shares at December 31, 2018 and 2019 and March 31, 2020 (unaudited), respectively; no shares issued and outstanding, pro forma (unaudited)

     224,769       224,769       224,769    

Common stock, $0.00005 par value. Authorized 124,433,107 shares at December 31, 2018 and 2019, respectively, and 130,600,000 at March 31, 2020 (unaudited); issued and outstanding 2,690,264, 3,073,067 and 3,081,647 shares at December 31, 2018 and 2019 and March 31, 2020 (unaudited), respectively; 53,543,919 shares issued and outstanding, pro forma (unaudited)

                       3  

Additional paid-in capital

     4,860       9,314       10,636       235,402  

Accumulated deficit

     (131,998     (150,300     (158,725     (158,725
  

 

 

 

Total stockholders’ equity

     97,631       83,783       76,680     $ 76,680  
  

 

 

 

Total liabilities and stockholders’ equity

   $ 133,819     $ 131,009     $ 122,778    

 

 

See accompanying notes to consolidated financial statements.

 

F-3


Table of Contents

Berkeley Lights, Inc.

Consolidated statements of operations and comprehensive loss

 

     
    Year ended December 31,     Three months ended March
31,
 
(In thousands, except share and per share data)   2018     2019     2019     2020  
                (unaudited)  

Revenue:

       

Product revenue

  $ 22,882     $ 43,460     $ 9,527     $ 10,683  

Service revenue

    8,417       13,233       3,114       3,095  
 

 

 

 

Total revenue

    31,299       56,693       12,641       13,778  

Cost of sales:

       

Product cost of sales

    6,585       11,245       2,456       2,620  

Service cost of sales

    1,596       1,972       340       1,179  
 

 

 

 

Total cost of sales

    8,181       13,217       2,796       3,799  
 

 

 

 

Gross profit

    23,118       43,476       9,845       9,979  

Operating expenses:

       

Research and development

    29,077       38,414       8,743       10,976  

General and administrative

    9,069       12,362       2,642       3,997  

Sales and marketing

    6,131       9,237       1,837       3,234  
 

 

 

 

Total operating expenses

    44,277       60,013       13,222       18,207  
 

 

 

 

Loss from operations

    (21,159     (16,537     (3,377     (8,228

Other income (expense):

       

Interest expense

    (2,204     (1,425     (354     (357

Interest income

    872       909       232       151  

Other income (expense), net

    (777     (1,180     (687     25  
 

 

 

 

Loss before income taxes

    (23,268     (18,233     (4,186     (8,409

Provision for income taxes

    69       69       19       16  
 

 

 

 

Net loss and net comprehensive loss

  $ (23,337   $ (18,302   $ (4,205   $ (8,425
 

 

 

 

Net loss attributable to common stockholders per share, basic and diluted

  $ (10.19   $ (7.46   $ (1.84   $ (3.02
 

 

 

 

Weighted-average shares used in calculating net loss per share, basic and diluted

    2,605,124       2,883,950       2,717,542       3,047,967  
 

 

 

 

Pro forma net loss attributable to common stockerholders per share, basic and diluted, unaudited

    $ (0.34     $ (0.16
   

 

 

     

 

 

 

Weighted-average shares used in computing pro forma net loss per share, basic and diluted, unaudited

      53,346,222         53,510,239  

 

 

See accompanying notes to consolidated financial statements.

 

F-4


Table of Contents

Berkeley Lights, Inc.

Consolidated statements of changes in stockholders’ equity

 

           
    Convertible preferred
stock
    Common stock     Additional
paid-in

capital
    Accumulated
deficit
    Total
stockholders’

equity
 
(In thousands, except share data)   Shares     Amount     Shares     Amount  

Balances at December 31, 2017

    41,298,655     $ 129,972       2,479,089     $     $ 2,439     $ (108,710   $ 23,701  

Impact of adoption of ASU 2017-11

                            270       49       319  
 

 

 

 

Balances as adjusted at January 1, 2018

    41,298,655       129,972       2,479,089             2,709       (108,661     24,020  

Shares issued in connection with:

             

Issuance of Series E convertible preferred stock for cash, net of issuance costs of $206

    9,103,617       94,794                               94,794  

Issuance of Series A convertible preferred stock for cash from warrant exercise

    60,000       3                               3  

Exercise of stock options

                211,175             165             165  

Stock-based compensation

                            1,986             1,986  

Net loss

                                  (23,337     (23,337
 

 

 

 

Balances at December 31, 2018

    50,462,272     $ 224,769       2,690,264     $     $ 4,860     $ (131,998   $ 97,631  
 

 

 

 

Shares issued in connection with:

             

Exercise of stock options

                382,803             606             606  

Vesting of shares subject to repurchase from early exercised options

                            88             88  

Stock-based compensation

                            3,760             3,760  

Net loss

                                  (18,302     (18,302
 

 

 

 

Balances at December 31, 2019

    50,462,272     $ 224,769       3,073,067     $     $ 9,314     $ (150,300   $ 83,783  

Shares issued in connection with:

             

Exercise of stock options (unaudited)

                8,580             21             21  

Vesting of shares subject to repurchase from early exercised options (unaudited)

                            88             88  

Stock-based compensation (unaudited)

                            1,213             1,213  

Net loss (unaudited)

                                  (8,425     (8,425
 

 

 

 

Balances at March 31, 2020 (unaudited)

    50,462,272     $ 224,769       3,081,647     $     $ 10,636     $ (158,725   $ 76,680  
 

 

 

 

Balances at December 31, 2018

    50,462,272       224,769       2,690,264             4,860       (131,998     97,631  

Shares issued in connection with:

             

Exercise of stock options (unaudited)

                100,631             217             217  

Stock-based compensation (unaudited)

                            814             814  

Net loss (unaudited)

                                  (4,205     (4,205
 

 

 

 

Balances at March 31, 2019 (unaudited)

    50,462,272     $ 224,769       2,790,895     $     $ 5,891     $ (136,203   $ 94,457  

 

 

See accompanying notes to consolidated financial statements.

 

F-5


Table of Contents

Berkeley Lights, Inc.

Consolidated statements of cash flows

 

     
     Year ended
December 31,
    Three months ended
March 31,
 
(In thousands)    2018     2019    

2019

    2020  
                 (unaudited)  

Cash flows from operating activities:

        

Net loss

   $ (23,337   $ (18,302   $ (4,205   $ (8,425

Adjustments to reconcile net loss to cash used in operating activities:

        

Depreciation

     4,197       4,842       1,158       1,319  

Stock-based compensation

     1,986       3,760       814       1,179  

Amortization of operating lease right-of-use assets

           1,673       373       468  

Non-cash interest and other (income) expense related to debt and note receivable agreements

     (108     4       (4     17  

Provision for excess and obsolete inventory

     576       169       93       6  

Loss on impairment of property and equipment

     686       782       31       13  

Change in fair value of embedded derivative

     18       62       62        

Equity method losses in Optera Therapeutics Corp.

     755       806       625        

Net loss on dissolution of Optera Therapeutics Corp.

           236              

Changes in operating assets and liabilities:

        

Trade accounts receivable

     (6,973     2,389       2,955       (687

Inventory

     212       (4,019     (649     (3,469

Prepaid expenses and other current assets

     (1,161     (4,079     873       613  

Trade accounts payable

     1,146       494       148       1,160  

Deferred revenue

     7,545       1,634       (3,411     (2,026

Accrued expenses and other current liabilities

     947       782       (363     336  

Operating lease liabilities

           (1,766     (392     (492

Other non-current liabilities

     (24                  
  

 

 

 

Net cash used in operating activities

     (13,535     (10,533     (1,892     (9,988

Cash flows from investing activities:

        

Purchase of property and equipment

     (7,418     (8,423     (1,200     (760

Issuance of notes receivable

     (1,000     (1,000     (1,000      

Collection of notes receivable

           350              
  

 

 

 

Net cash used in investing activities

     (8,418     (9,073     (2,200     (760

Cash flows from financing activities:

        

Net proceeds from issuance of preferred stock

     94,797                    

Proceeds from notes payable

     20,000                    

Principal payments on notes payable

     (19,132                  

Debt issuance costs

     (273                  

Proceeds from issuance of common stock upon exercise of stock options

     165       606       217       21  

Proceeds from issuance of common stock upon early exercise of stock options

           416              
  

 

 

 

Net cash provided by financing activities

     95,557       1,022       217       21  

Net increase (decrease) in cash and cash equivalents and restricted cash

     73,604       (18,584     (3,875     (10,727

Cash and cash equivalents and restricted cash at beginning of period

     26,283       99,887       99,887       81,303  
  

 

 

 

Cash and cash equivalents and restricted cash at end of period

   $ 99,887     $ 81,303     $ 96,012     $ 70,576  

 

 

See accompanying notes to consolidated financial statements.

 

F-6


Table of Contents

(1) The company and basis of presentation

Description of business

Berkeley Lights, Inc. (“Berkeley Lights”), was incorporated as a Delaware corporation on April 5, 2011. Berkeley Lights is a leading Digital Cell Biology company focused on enabling and accelerating the rapid development and commercialization of biotherapeutics and other cell-based products. Berkeley Light’s platform is a fully integrated, end-to-end solution, comprised of proprietary consumables, including our OptoSelect chips and reagent kits, advanced automation systems and advanced application and workflow software.

In 2017, Berkeley Lights incorporated BLI Europe International, Ltd. as a wholly-owned subsidiary in the United Kingdom to support Berkeley Lights’ planned expansion in Europe. Berkeley Lights also established a representative branch office in China during 2019 to support its pre-sales and marketing efforts in the region. Berkeley Lights and its consolidated subsidiary are hereinafter referred to as the “Company”. The Company’s headquarters are in Emeryville, California.

The Company commercially launched its platform in December of 2016, which included Beacon and the alpha version of its Opto Cell Line Development 1.0 workflow, targeted to the antibody therapeutics market. In June 2019, the Company launched its desktop Lightning system targeted for assay development and lower throughput workflows. The Company is expanding the platform capabilities through the commercial launch of additional workflows as well as to encompass cell and gene therapies and other research.

Basis of presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP.

Reclassifications

Certain reclassifications have been made to the prior year’s consolidated statement of operations and comprehensive loss to conform to the current year presentation. These reclassifications served to change the classification of income on our cash and cash equivalents from other income (expense), net to interest income for the year ended December 31, 2018 and had no impact on previously reported total operating expenses or net income in the consolidated statement of operations and comprehensive loss.

Liquidity

The Company’s consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has experienced losses from its operations since its inception and has relied primarily on equity and debt financing to fund its operations to date. For the year ended December 31, 2019 and the three months ended March 31, 2020 (unaudited), the Company had a consolidated net loss of $18.3 million and $8.4 million, respectively, and had an accumulated deficit of $150.3 million and $158.7 million, respectively. The Company has continued to rely on equity and debt financing activities, including most recently raising gross proceeds of $95.0 million through the sale and issuance of Series E convertible preferred stock in 2018, as its primary source of cash, but has also benefited from operating cash flows from the sale of products, as well as certain development agreements with biopharmaceutical companies and research hospitals. The Company’s primary uses of cash are research and

 

F-7


Table of Contents

development of its technology platform and administrative activities including employee related expenses, as well as general, operating, sales, marketing and overhead expenses. The Company expects a significant portion of its short-term financing needs to be met by its existing cash on hand as well as through cash flows from operations. Management believes that it has sufficient resources to continue as a going concern through at least 12 months from the date the consolidated financial statements are issued.

Successful completion of the Company’s current and future business development programs, product commercialization and, ultimately, the attainment of profitable operations are dependent on future events, including, among other things, the Company’s ability to successfully commercialize and launch its technology platforms, to access additional potential markets, to obtain adequate financing to fulfill its business development activities, to attract, retain and motivate qualified personnel, to develop strategic alliances and to achieve a level of sales adequate to support the Company’s cost structure. If the Company is unable to execute on its business plan and adequately fund its operations, or if the business plan requires a level of spending in excess of cash resources, the Company may need to seek additional financing and/or reduce discretionary spending. There can be no assurance, however, that the Company will be able to generate sufficient cash from operations to adequately fund operating needs or ultimately achieve profitability, or that additional financing will be available on terms acceptable to the Company, if at all. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

(2) Summary of significant accounting policies

Principles of consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated.

Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the estimate of the standalone selling price of performance obligations and allocation of contract price in multiple-element revenue arrangements, total expected costs associated with development agreements, estimated transaction price, including variable consideration, of the Company’s revenue contracts, accruals for product warranties, the fair value of equity awards and related share-based compensation, the collectability of accounts receivable, valuation of inventory and the realizability of deferred income taxes. Actual results could significantly differ from those estimates.

Unaudited financial information

The accompanying interim consolidated balance sheet as of March 31, 2020, the interim consolidated statements of operations and comprehensive loss, cash flows, and changes in stockholders’ equity (deficit) for the three months ended March 31, 2019 and 2020, and the related footnote disclosures are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, that are necessary for the fair presentation of the Company’s financial position as of March 31, 2020, and results of its operations and cash flows for the three months ended March 31, 2019 and 2020. The results as of and for the three months ended March 31, 2020 are not

 

F-8


Table of Contents

necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other future periods.

Cash and cash equivalents and restricted cash

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

The Company records cash and cash equivalents as restricted when it is unable to freely use such cash and cash equivalents for general operating purposes. As of December 31, 2018 and 2019 and March 31, 2020 (unaudited), restricted cash consists of cash on deposit in a financial institution that is restricted from use for the Company’s corporate credit card program.

The following table provides a reconciliation of cash and cash equivalents and restricted cash on the consolidated balance sheets to the totals presented on the consolidated statements of cash flows (in thousands):

 

       
     December 31,      March 31,      March 31,  
      2018      2019      2019      2020  
                   (unaudited)  

Cash and cash equivalents

   $ 99,617      $ 81,033      $ 95,742      $ 70,306  

Restricted cash

     270        270        270        270  
  

 

 

 

Total cash and cash equivalents and restricted cash as presented on the consolidated statements of cash flows

   $ 99,887      $ 81,303      $ 96,012      $ 70,576  

 

 

Trade accounts receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers historical losses adjusted to take into account current market conditions and the Company’s customers’ respective financial conditions, the amounts of receivables in dispute and the current receivables aging and current payment patterns. To the extent identified, account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date its customers have primarily been large biopharmaceutical and related companies and therefore we have not had any material write-offs or allowance for doubtful accounts in the years ended December 31, 2018 and 2019 or in the three months ended March 31, 2019 and 2020 (unaudited).

Inventory

Inventories are stated at the lower of cost and net realizable value. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand and market conditions. Inventory write-downs are charged to cost of goods sold and establish a new cost basis for the inventory. Costs included in inventories are raw materials, labor, supplies, allocable depreciation of manufacturing facilities and equipment and overhead.

Revenue recognition

The Company early adopted Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”) on January 1, 2018 using the full retrospective method.

 

F-9


Table of Contents

The Company derives revenue from two primary sources, Product revenues, which are comprised primarily of direct platform sales revenues and consumables revenues, and Service revenues, which are comprised of revenue from joint development agreements, service and warranty, platform support and feasibility studies on the Company’s platforms. Revenues are recognized net of applicable taxes imposed on the related transaction.

The Company recognizes revenue when the Company satisfies the performance obligations under the terms of a contract and control of its products and services is transferred to its customers in an amount that reflects the consideration the Company expects to receive from its customers in exchange for those products and services. This process involves identifying the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the contract price to the distinct performance obligations in the contract based on standalone selling price, and recognizing revenue when the performance obligations have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to the customer either on its own or together with other resources that are readily available to the customer and is separately identified in the contract. The Company considers a performance obligation satisfied once it has transferred control of a good or service to the customer, meaning the customer has the ability to use and obtain the benefit of the good or service.

The Company’s agreements with customers often include multiple performance obligations, which can sometimes be included in separate contracts entered into within a reasonably short period of time. The Company considers an entire customer arrangement to determine if separate contracts should be considered combined for the purposes of revenue recognition.

In order to determine the stand-alone selling price, the Company conducts a periodic analysis to determine whether various goods or services have an observable stand-alone selling price as well as to identify significant changes to current stand-alone selling prices. If the Company does not have an observable stand-alone selling price for a particular good or service, then the stand-alone selling price for that particular good or service is estimated using an approach that maximizes the use of observable inputs. The Company’s process for determining stand-alone selling price requires judgment and considers multiple factors that are reasonably available and maximizes the use of observable inputs that may vary over time depending upon the unique facts and circumstances related to each performance obligation. The Company believes that this method results in an estimate that represents the price the Company would charge for the product offerings if they were sold separately.

For most of its performance obligations, the Company has established stand-alone selling price as a range rather than a single value, such range being plus or minus 15% of the median of observables prices. If the contractually stated prices of all the performance obligations in a contract fall within their respective stand-alone selling price ranges, the Company will allocate the transaction price at the contractually stated amounts. In situations where the contractually stated price for one or more performance obligations in a contract fall(s) outside of their respective stand-alone selling price range, the Company will use the mid-point of the respective stand-alone selling price range for performance obligations in the contract priced outside of their respective stand-alone selling price range(s) and contract values for performance obligations priced within their respective stand-alone selling price range(s), to allocate the transaction price on a relative stand-alone selling price basis.

Taxes, such as sales, value-add and other taxes, collected from customers concurrent with revenue generating activities and remitted to governmental authorities are not included in revenue. Shipping and handling costs associated with outbound freight are accounted for as a fulfillment cost and are included in cost of sales.

 

F-10


Table of Contents

The following describes the nature of the Company’s primary types of revenue and the revenue recognition policies and significant payment terms as they pertain to the types of transactions the Company enters into with its customers.

Product revenues

Product revenues are comprised of two major revenue streams, direct platform sales and consumables. Direct platform sales revenues are comprised of advanced automation systems (including workflow licenses) as well as Culture Stations. Consumables revenues are comprised of OptoSelect Chips required to run the system as well as reagent kits. The Company’s standard arrangement with its customers is generally a purchase order or an executed contract. Revenue is recognized upon transfer of control of the products to the customer, which, for the Company, generally occurs at a point in time upon the completion of installation and training for advanced automation systems or when the product is shipped or delivered for consumables and Culture Stations. Payment terms are generally thirty to ninety days from the date of invoicing.

On a limited basis, the Company also enters into fixed-term sales-type lease arrangements with certain qualified customers. Revenue from sales-type lease arrangements is generally recognized in a manner consistent with platform equipment, assuming all other revenue recognition criteria have been met.

Service revenues

Service revenues primarily consist of joint development agreements, service and warranty, platform support and feasibility studies on the Company’s advanced automation systems and workflows. The Company’s services are provided primarily on a fixed fee basis; from time to time these fixed fee contracts may be invoiced at the outset of the arrangements. The Company recognizes revenue from the sale of an extended warranty, enhanced service warranty arrangements and feasibility studies over the respective period, while revenue on platform support is recognized as the services are performed. Service contracts are typically short-term in nature. Payment terms are generally thirty to ninety days from the date of invoicing.

Joint development agreements are agreements whereby the Company provides services for the development of customized advanced automation systems and workflows to meet a specific customer’s needs. Such contracts generally include defined milestones associated with these development activities over extended periods of time, some in excess of twenty-four months. There are formal customer acceptance clauses as each milestone is completed, and an approval to proceed with the next milestone is generally required. The Company recognizes revenue over time, using an input measure of progress based on costs incurred to date relative to total expected costs. Payment terms are generally thirty to ninety days from the achievement of each milestone.

The Company places a constraint on a variable consideration estimate that focuses on possible future downward revenue adjustments (i.e. revenue reversals) if there is uncertainty that could prevent a faithful depiction of the consideration that the Company expects to be entitled to. The constraint estimate is reassessed at each reporting date until the uncertainty is resolved.

Contract assets and contract liabilities

Contract assets include amounts where revenue recognized exceeds the amount invoiced to the customer and the right to payment is not solely subject to the passage of time. The Company’s contract asset balances of $0.6 million, $5.2 million and $4.4 million as of December 31, 2018 and 2019 and March 31, 2020 (unaudited), respectively, are primarily from its development and feasibility study agreements. The Company does not have impairment losses associated with contracts with customers for the years ended December 31, 2018 and 2019 or the three months ended March 31, 2019 and 2020 (unaudited).

 

F-11


Table of Contents

Contract liabilities consist of fees invoiced or paid by the Company’s customers for which the associated services have not been performed and revenues have not been recognized based on the Company’s revenue recognition criteria described above. Such amounts are reported as deferred revenue on the consolidated balance sheets. Deferred revenue that is expected to be recognized during the following twelve months is recorded as a current liability and the remaining portion is recorded as non-current.

Contract assets and contract liabilities are reported in a net position on an individual contract basis at the end of each reporting period. Contract assets are classified as current or long-term on the consolidated balance sheet based on the timing of when the Company expects to complete the related performance obligations and invoice the customers. Contract liabilities are classified as current or long-term on the consolidated balance sheet based on the timing when the revenue recognition associated to the related customer payments and invoicing is expected to occur.

Costs to obtain or fulfill a contract

Origination costs relate primarily to the payment of incentive bonuses that are directly related to sales transactions. Fulfillment costs generally include the direct cost of services such as platform support and feasibility studies.

Origination and fulfillment costs that are internal to the Company are generally expensed when incurred because most costs are incurred concurrently with the delivery of the related goods and services, which are predominantly recognized at a point in time or short-term in nature. The origination costs that are related to long-term development agreements are capitalized and amortized over the relevant service period.

The origination costs that are related to long-term development agreements are not material as of December 31, 2018 and 2019 and March 31, 2020 (unaudited).

Property and equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation on plant and equipment is calculated on the straight-line method over the estimated useful lives of the assets. Expenditures for major additions and improvements to property and equipment are capitalized and maintenance and repairs are charged to expense as incurred. Assets not yet placed in use are not depreciated.

The estimated useful lives of Company’s property and equipment are as follows:

 

Equipment, tooling and molds

  

5—7 years

Computer equipment and software

  

3—7 years

Furniture, fixtures and other

  

3—7 years

Leasehold Improvements

  

Shorter of lease term or estimated useful life

 

Other assets

Other current assets and other assets consist primarily of prepaid rent, prepaid insurance and advance payments made to certain vendors for future delivery of goods or services and software implementation costs for cloud-based hosting arrangements that are a service contract.

The Company expenses all costs (internal and external) that were incurred in the planning and post-implementation operation stages of such implementations and capitalizes costs related to the application

 

F-12


Table of Contents

development stage of such projects. The capitalized costs are amortized on a straight-line basis over the estimated useful life of five years starting on the date that the projects are placed into production and are ready for their intended use. As of December 31, 2018 approximately $27,000 and $0.2 million of the capitalized costs were classified in prepaid expenses and other current assets and other assets, respectively. As of December 31, 2019, approximately $0.2 million and $0.9 million of the capitalized costs were classified in prepaid expenses and other current assets and other assets, respectively. As of March 31, 2020 (unaudited), approximately $0.2 million and $0.8 million of the capitalized costs were classified in prepaid expenses and other current assets and other assets, respectively.

Deferred offering costs

Deferred offering costs, which consist of direct incremental legal, consulting, banking and accounting fees relating to equity offerings, are capitalized and will be offset against proceeds upon the consummation of the offerings within stockholders’ equity. In the event an anticipated offering is terminated, deferred offering costs will be expensed. As of December 31, 2018 and 2019, there were no capitalized deferred offering costs in the consolidated balance sheets. As of March 31, 2020 (unaudited), there were $0.2 million of deferred offering costs in the consolidated balance sheet.

Research and development costs

Research and development costs primarily consist of salaries, benefits, incentive compensation, stock-based compensation, laboratory supplies, materials expenses and allocated facilities costs for employees and contractors engaged in development arrangements, research, regulatory affairs, and product development. The Company expenses all research and development costs in the periods in which they are incurred.

Advertising expenses

The cost of advertising, marketing and media is expensed as incurred. For the years ended December 31, 2018 and 2019, advertising costs totaled $0.5 million and $1.0 million, respectively. For the three months ended March 31, 2019 and 2020 (unaudited), advertising costs totaled $0.1 million and $0.5 million, respectively.

Income taxes

The Company accounts for income taxes under an asset-and-liability approach. Deferred income taxes comprise the impact of temporary differences between assets and liabilities recognized for financial reporting purposes and the amounts recognized for income tax reporting purposes, net operating loss carryforwards, and other tax credits measured by applying currently enacted tax laws. A valuation allowance is provided when necessary to reduce deferred tax assets to an amount that is more likely than not to be realized.

The Company determines whether a tax position is more likely than not to be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company uses a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement. The Company’s policy for interest and penalties related to uncertain tax positions is to recognize interest and penalties, if any, as a component of the provision for income taxes in the consolidated statements of

 

F-13


Table of Contents

operations and to include accrued interest and penalties within the related tax liability line in the consolidated balance sheets.

Currently, the Company has provided a valuation reserve equal to 100% of its deferred tax assets as the Company is not in a position to determine if its operating plans will be successful and result in taxable income to absorb any loss carryforwards.

Stock-based compensation

The Company maintains an incentive compensation plan under which incentive stock options and nonqualified stock options are granted primarily to employees and non-employee consultants.

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service period. The fair value of stock-based awards to employees is estimated using the Black-Scholes option pricing model. The Company records forfeitures as they occur.

Stock-based compensation expense for nonemployee stock options is measured at the grant date based on fair market value using the Black-Scholes option pricing model and is recorded as the options vest. Prior to January 1, 2019, nonemployee stock options subject to vesting were revalued periodically over the requisite service period, which was generally the same as the vesting term of the award. From January 1, 2019, the grant date fair market value of nonemployee stock options is recognized in the consolidated statements of operations on a straight-line basis over the requisite service period and forfeitures are recognized as they occur.

Long-lived assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows which the assets are expected to generate. If the carrying amount of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third party independent appraisals, as considered necessary.

During the years ended December 31, 2018 and 2019, the Company recorded asset impairments totaling $0.7 million and $0.8 million, respectively, and during the three months ended March 31, 2019 and 2020 (unaudited), the Company recorded asset impairments totaling $31,000 and $13,000, respectively, on certain equipment (see Note 7 of these consolidated financial statements).

Fair value measurements

The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels (see Note 6 to these consolidated financial statements):

 

   

Level 1 Inputs: Unadjusted quoted prices in active markets accessible to the reporting entity at the measurement date for identical assets or liabilities.

 

F-14


Table of Contents
   

Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

 

   

Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company recognizes transfers between levels of the fair value hierarchy on the date of the event or change in circumstances that caused the transfer.

Product warranties

The Company provides a one-year assurance-type warranty on its platforms and chip consumables. At the time revenue is recognized, the Company establishes an accrual for estimated warranty expenses based on historical data and trends of product reliability and costs of repairing and replacing defective products. The Company exercises judgment in estimating the expected product warranty costs, using data such as the actual and projected product failure rates, estimated repair costs, freight, material, labor, and overhead costs. While management believes that historical experience provides a reliable basis for estimating such warranty cost, unforeseen quality issues or component failure rates could result in future costs in excess of such estimates, or alternatively, improved quality and reliability in the Company’s products could result in actual expenses that are below those currently estimated.

Foreign currency translation and transactions

The Company has determined that the functional and reporting currency for its operations in the United Kingdom is the U.S. Dollar. Gains or losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in other income (expense), net.

Leases

Prior to 2019, the Company recognized rent expense associated with its operating lease agreements on a straight-line basis over the terms of the leases. Incentives granted under its facility leases, including rent holidays, were capitalized and recognized as adjustments to rent expense on a straight-line basis over the terms of the leases.

Effective January 1, 2019, the Company early adopted ASU 2016-02, Leases (Topic 842) (“Topic 842”), using the optional transition method and applied the standard only to leases that existed at that date.

The Company determines the initial classification and measurement of its right-of-use assets and lease liabilities at the lease commencement date and thereafter, if modified. The lease term includes any renewal options and termination options that the Company is reasonably assured to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its incremental borrowing rate. The incremental borrowing rate is determined by using the rate of interest that the Company would pay to borrow on a collateralized basis an amount equal to the lease payments for a similar term and in a similar economic environment.

Lease expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expenses in the consolidated statements of operations and comprehensive income.

 

F-15


Table of Contents

For all leases, rent payments that are based on a fixed index or rate at the lease commencement date are included in the measurement of lease assets and lease liabilities at the lease commencement date.

The Company has elected the practical expedient to not separate lease and non-lease components. The Company’s non-lease components are primarily related to property maintenance and insurance, which varies based on future outcomes, and thus is recognized in rent expense when incurred.

The Company also act as a lessor to provide equipment financing through sales-type lease arrangements with certain qualified customers. Revenue from sales-type leases is presented on a gross basis when the company enters into a lease to realize value from a product that it would otherwise sell in its ordinary course of business. Amounts due and receivable under these arrangements are recorded at the outset of the arrangement as a contract asset in prepaid expenses and other current assets until such time that invoices are issued in accordance with the terms of the lease, at which point they are recorded as trade accounts receivable in the consolidated balance sheets.

Net loss attributable to common stockholders per share

Net loss attributable to common stockholders per share is computed by dividing the weighted-average number of common shares outstanding for the period. Diluted net loss per share reflects the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock; however, potential common equivalent shares are excluded if their effect is anti-dilutive. In computing diluted net loss per share, the Company utilizes the treasury stock method.

The Company applies the two-class method to compute basic and diluted net loss or income per share when it has issued shares that meet the definition of participating securities. The two-class method determines net (loss) or income per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires net (loss) income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to share in the earnings as if all net (loss) income for the period had been distributed. The Company’s convertible preferred stock participates in any dividends declared by the Company and are therefore considered to be participating securities. The participating securities are not required to participate in the losses of the Company, and therefore during periods of loss there is no allocation required under the two-class method.

Unaudited pro forma net loss attributable to common stockholders per share

In contemplation of an initial public offering (“IPO”), the Company has presented unaudited pro forma basic and diluted net loss per share for the three months ended March 31, 2020. Unaudited pro forma basic net loss per share attributable to common stockholders as of March 31, 2020 is computed to give effect to adjustments to the denominator in the pro forma basic and diluted net loss per share calculation to effect the conversion of all outstanding shares of the Company’s convertible preferred stock into 50,462,272 shares of common stock as if the conversion had occurred as of the beginning of the period or the original date of issuance, if later.

Unaudited pro forma diluted net loss is the same as unaudited pro forma basic net loss per share attributable for the period as the impact of any potentially dilutive securities was anti-dilutive, which has been computed to give effect to the adjustment noted above. The pro forma net loss per share attributable to common stockholders does not include proceeds to be received from nor does it include shares expected to be sold in the assumed IPO.

 

F-16


Table of Contents

Unaudited pro forma balance sheet

The unaudited pro forma balance sheet information as of March 31, 2020 assumes all shares of convertible preferred stock had automatically converted into an aggregate of 50,462,272 shares of the Company’s common stock upon the completion of an IPO.

Recently issued and adopted accounting standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASC 606, which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition (Topic 605), and requires the recognition of revenue as promised goods or services are transferred to customers in an amount that reflects the consideration which the entity expects to be entitled to in exchange for those goods or services. ASC 606 also includes Subtopic 340-40, Other Assets and Deferred Costs; Contracts with Customers, which requires the deferral of incremental costs of obtaining a contract with a customer. Collectively, the Company refers to ASC 606 and Subtopic 340-40 as the “new revenue standard”. The Company adopted the new revenue standard on January 1, 2018 using the full retrospective method and have restated the prior reporting period presented under the new rules. Refer to Note 4 of these consolidated financial statements for a summary of the impacts of adopting this standard and for a discussion of the Company’s updated policies related to revenue recognition.

In February 2016, the FASB issued Topic 842, which requires a lessee to recognize on the balance sheets a right-of-use asset, representing its right to use the underlying asset for the lease term, and a corresponding lease liability. The liability is equal to the present value of lease payments while the right-of-use asset is based on the liability, subject to adjustment, such as for initial direct costs. In addition, ASU 2016-02 expands the disclosure requirements for lessees.

Effective January 1, 2019, the Company early adopted ASC Topic 842 using the optional transition method and applied the standard only to leases that existed at that date. Under the optional transition method, the Company does not need to restate the comparative periods in transition and will continue to present financial information and disclosures for periods before January 1, 2019 in accordance with ASC Topic 840. The Company elected the package of practical expedients allowed under ASC Topic 842, which permits the Company to carry forward its historical lease classification, without reassessing the Company’s prior conclusions about lease identification, lease classification and initial direct cost. Further, the Company elected the short-term lease exception as a practical expedient.

As a result of the adoption of the new lease accounting guidance, on January 1, 2019, the Company recognized operating lease right-of-use assets of approximately $8.7 million and operating lease liabilities of approximately $9.8 million. The difference in the operating lease right-of-use assets and operating lease liabilities is due to the derecognition of deferred rent of $1.1 million. The standard did not impact its statements of operations and had no impact on its cash flows, nor did the adoption of this standard result in a cumulative effect adjustment to accumulated deficit.

In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, which simplifies the accounting for share-based payments to nonemployees by more closely aligning the accounting for employee and nonemployee share-based payments. This pronouncement is effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2018. Early adoption is permitted. The Company adopted the provisions of this new guidance effective January 1, 2019, with such adoption not having a material impact to the Company’s consolidated financial statements.

 

F-17


Table of Contents

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (ASC Topic 260); Distinguishing Liabilities from Equity (ASC Topic 480); Derivatives and Hedging (ASC Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception (ASU 2017-11), which served to, amongst other things, eliminated the requirement for equity-linked instruments or embedded equity-linked features to be accounted for as a liability solely because there is a down round feature. This guidance is effective for private entities in annual periods beginning after December 15, 2019 and for public companies in annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted.

ASU 2017-11 can be adopted by means of a cumulative-effect adjustment to the statement of financial position as of the beginning of the first fiscal year and interim period(s) in which it is effective. The cumulative effect of the change should be recognized as an adjustment of the opening balance of retained earnings in the fiscal year and interim period of adoption. Alternatively, it can be adopted retrospectively to outstanding financial instruments with a down round feature for each prior reporting period presented. The Company early adopted ASU 2017-11 retrospectively effective January 1, 2018 by means of a cumulative-effective adjustment to the statement of financial position resulting from the impact of the new guidance on its preferred stock warrants. The following table presents the impact of adoption of ASU 2017-11 to select line items of the Company’s consolidated balance sheet and statement of operations and comprehensive loss as of January 1, 2018 (in thousands):

 

       
      As of
December 31,
2017
    Adjustments     As of
January 1,
2018
 

Liabilities and Stockholders’ Equity:

      

Accrued expenses and other current liabilities

   $ 2,480     $ (319   $ 2,161  

Total current liabilities

     10,433       (319     10,114  

Additional paid-in capital

     2,439       270       2,709  

Accumulated deficit

     (108,710     49       (108,661

Total liabilities and stockholders’ equity

     23,701       319       24,020  

 

 

With the exception of the new standards discussed above, there have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations and cash flows.

In June 2016, the FASB issued ASU No. 2016-13, Credit losses (Topic 326), which sets forth a “current expected credit loss” (CECL) model which requires the Company to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets measured at amortized cost and applies to some off-balance sheet credit exposures. The standard is effective for fiscal years beginning after December 31, 2020 for private entities and December 31, 2019 for public entities, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted Topic 326 effective January 1, 2020; such adoption did not have a material impact on its unaudited consolidated financial statements.

Recently issued but not yet adopted accounting standards

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which removes certain exceptions related to intra-period tax allocations and deferred tax accounting on outside basis differences in foreign subsidiaries and equity method investments. Additionally,

 

F-18


Table of Contents

it provides other simplifying measures for the accounting for income taxes. ASU 2019-12 is effective for the Company in the first quarter of 2021 and early adoption is permitted. The Company is currently evaluating the impact the new guidance will have on its financial position, results of operations and cash flows.

(3) Significant risks and uncertainties including business and credit concentrations

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents and trade receivables. The Company’s cash equivalents are held by large, credit worthy financial institutions. The Company invests its excess cash in money market funds. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these banks may exceed the amounts of insurance provided on such deposits. To date, the Company has not experienced any losses on its deposits of cash and cash equivalents.

The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of specific customer accounts and the aging of the related invoices and represents the Company’s best estimate of probable credit losses in its existing trade accounts receivable. At each of December 31, 2018 and 2019 and March 31, 2020 (unaudited), the Company had not recorded any material allowance for doubtful accounts.

Most of the Company’s customers are located in the United States. For the year ended December 31, 2018, one customer accounted for 12% of revenue. For the year ended December 31, 2019, no customers accounted for more than 10% of revenue. Five customers accounted for 19%, 17%, 17%, 16% and 13%, respectively, of accounts receivable at December 31, 2018. Four customers comprised 20%, 19%, 18% and 12%, respectively, of accounts receivable at December 31, 2019. For the three months ended March 31, 2019 (unaudited), five customers accounted for 32%, 15%, 14%, 13% and 13% of revenue, respectively, and for the three months ended March 31, 2020 (unaudited), six customers accounted for 17%, 14%, 13%, 13%, 12% and 12% of revenue, respectively. Four customers accounted for 25%, 18%, 18% and 16%, respectively, of accounts receivable at March 31, 2020 (unaudited).

(4) Revenue from contracts with customers

The Company adopted ASC 606 and related amendments on January 1, 2018, using the full retrospective method, and accordingly, has restated the prior reporting period presented to conform to the new rules. The most significant impact of the new standard relates to the Company’s accounting for development agreement arrangements. For development agreements, contracts generally include specific milestones associated with the development of customized platforms over extended periods of time. Under the prior rules, revenues were recognized over time using the percentage of completion method based on the input measure of costs incurred, subject to contingent revenue provision limits. Under the new standard, contingent revenue is no longer applicable, and revenue is also recognized over time using an input measure of progress based on costs incurred, subject to the variable consideration constraint, ensuring that a cumulative significant revenue reversal is not probable.

 

F-19


Table of Contents

Disaggregation of revenue

The following table depicts the disaggregation of revenue by type of customer or sales channel, market segment as defined by nature of workflows and activities of the end customer and timing of revenue recognition (in thousands):

 

     
     Year ended
December 31,
     Three months ended
March 31,
 
      2018      2019      2019      2020  
                   (unaudited)  

Type of Sales Channel

           

Direct sales channel

   $ 30,182      $ 53,014      $ 12,601      $ 11,981  

Distributor channel

     1,117        3,679        40        1,797  
  

 

 

 

Net Revenues

   $ 31,299      $ 56,693      $ 12,641      $ 13,778  
  

 

 

 

Market Segment

           

Antibody Therapeutics

   $ 30,277      $ 49,428      $ 12,380      $ 11,821  

Cell Therapy

     1,012        2,550        181        351  

Synthetic Biology

     10        4,715        80        1,606  
  

 

 

 

Net Revenues

   $ 31,299      $ 56,693      $ 12,641      $ 13,778  
  

 

 

 

Timing of Revenue Recognition

           

Goods and services transferred at a point in time

   $ 22,831      $ 43,359      $ 9,527      $ 10,688  

Services transferred over time

     8,468        13,334        3,114        3,090  
  

 

 

 

Net Revenues

   $ 31,299      $ 56,693      $ 12,641      $ 13,778  

 

 

Revenues by geographical markets are presented in Note 18 to these consolidated financial statements.

Contract balances

The following table provides information about receivables, contract assets and deferred revenue from contracts with customers (in thousands):

 

     
     December 31,      March 31,
2020
 
      2018      2019  
                   (unaudited)  

Trade accounts receivable

   $ 11,723      $ 9,334      $ 10,021  

Contract assets, which are included in ‘Prepaid expenses and other current assets’

     646        5,234        4,441  

Deferred revenue (current)

     9,482        9,686        7,745  

Deferred revenue (non-current)

     31        1,461        1,376  

 

 

For the years ended December 31, 2018 and 2019 and for the three months ended March 31, 2019 and 2020 (unaudited), changes in the contract assets were associated with feasibility and development agreement revenues, primarily due to the timing difference of progress made on a project and the related right to bill upon completion of a feasibility program or achievement of milestones.

For the year ended December 31, 2018, deferred revenue increased by $9.2 million, primarily due to an increase in advance billings on advanced automation systems arrangements. This excludes the amounts recognized as revenue during the year. Of the amount of revenue recognized during the year ended December 31, 2018, $1.6 million was included in the deferred revenue balance at December 31, 2017. The

 

F-20


Table of Contents

Company did not have a cumulative catch-up adjustment to revenue that affected the corresponding deferred revenue amounts during the year ended December 31, 2018.

For the three months ended March 31, 2019 (unaudited), deferred revenue decreased by $3.4 million, primarily due to a decrease in advance billings on advanced automation systems arrangements. This excludes the amounts recognized as revenue during the three-month period. Of the amount of revenue recognized during the three months ended March 31, 2019 (unaudited), $7.8 million was included in the deferred revenue balance at December 31, 2018. The Company did not have a cumulative catch-up adjustment to revenue that affected the corresponding deferred revenue amounts during the three months ended March 31, 2019 (unaudited).

For the year ended December 31, 2019, deferred revenue increased by $1.6 million, primarily due to an increase in advance billings for development agreements along with extended warranty and product purchases. This excludes the amounts recognized as revenue during the year. Of the amount of revenue recognized during the year ended December 31, 2019, $9.1 million was included in the deferred revenue balance at December 31, 2018. The Company did not have a cumulative catch-up adjustment to revenue that affected the corresponding deferred revenue amounts during the year ended December 31, 2019.

For the three months ended March 31, 2020 (unaudited), deferred revenue decreased by $2.0 million, primarily due to recognition of previously deferred revenue associated with development agreements, offset by renewals and advance payments on extended and enhanced warranty programs. This excludes the amounts recognized as revenue during the three-month period. Of the amount of revenue recognized during the three months ended March 31, 2020 (unaudited), $1.9 million was included in the deferred revenue balance at December 31, 2019. The Company did not have a cumulative catch-up adjustment to revenue that affected the corresponding deferred revenue amounts during the three months ended March 31, 2020 (unaudited).

Performance obligations

A significant number of the Company’s product and service sales, as well as its feasibility study arrangements, are short-term in nature with a contract term of one year or less. For those contracts, the Company has utilized the practical expedient in ASC 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of one year or less.

As of December 31, 2019, the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied was $3.8 million which includes deferred revenue on the Company’s consolidated balance sheet. Of that amount, $0.9 million will be recognized as revenue during the year ended December 31, 2020 and approximately $2.9 million thereafter.

As of March 31, 2020 (unaudited), the aggregate amount of the transaction price allocated to the remaining performance obligations related to customer contracts that are unsatisfied or partially unsatisfied was $2.5 million, which includes deferred revenue on the Company’s consolidated balance sheet. Of that amount, $1.1 million will be recognized as revenue over the next twelve months and approximately $1.4 million thereafter.

Sales-type lease arrangements

The company enters into sales-type lease arrangements with certain qualified customers. Revenue related to lease elements from sales-type leases is presented as product revenue and was $1.9 million for the year

 

F-21


Table of Contents

ended December 31, 2019. The Company recorded no sales-type lease arrangement revenue in the year ended December 31, 2018 or in the three months ended March 31, 2019 and 2020 (unaudited).

The following table presents the future maturity of the Company’s fixed-term customer leases and reconciles the undiscounted cash flows to the amounts due from customers under such arrangements as of December 31, 2019 (in thousands):

 

   
      Sales-Type
Leases
 

2020

   $ 982  

2021

     737  

2022

     368  

Thereafter

      
  

 

 

 

Total undiscounted cash flows

     2,087  

Less: unearned income

     (264
  

 

 

 

Total amounts due from customers, gross

   $ 1,823  

The following table presents the future maturity of the Company’s fixed-term customer leases and reconciles the undiscounted cash flows to the amounts due from customers under such arrangements as of March 31, 2020 (unaudited) (in thousands):

 

   
      Sales-Type
Leases
 
     (unaudited)  

Remainder of 2020

   $ 552  

2021

     737  

2022

     368  

Thereafter

      
  

 

 

 

Total undiscounted cashflows

     1,657  

Less: unearned income

     (200
  

 

 

 

Total amounts due from customers, gross

   $ 1,457  

(5) Balance sheet accounts

Inventory

The following table shows the components of inventory (in thousands):

 

     
     December 31,      March 31,
2020
 
      2018      2019  
                   (unaudited)  

Raw materials

   $ 1,227      $ 3,392      $ 4,438  

Finished goods

     1,639        3,789        6,240  
  

 

 

 
   $ 2,866      $ 7,181      $ 10,678  

 

 

 

F-22


Table of Contents

Prepaid expenses and other current assets

The following table shows the components of prepaid expenses and other current assets (in thousands):

 

     
     December 31,      March 31,
2020
 
      2018      2019  
                   (unaudited)  

Contract asset

   $ 646      $ 5,234      $ 4,441  

Vendor deposits

     1,988        65        74  

Deferred costs

     653        554        446  

Other

     1,502        1,946        2,285  
  

 

 

 
   $ 4,789      $ 7,799      $ 7,245  

 

 

Accrued expenses and other current liabilities

The following table shows the components of accrued expenses and other current liabilities (in thousands):

 

     
     December 31,      March 31,
2020
 
      2018      2019  
                   (unaudited)  

Accrued payroll and employee related expenses

   $ 1,908      $ 2,134      $ 2,020  

Lease liability—short-term

            2,067        2,118  

Accrued product warranty

     601        1,065        1,193  

Other

     655        963        1,197  
  

 

 

 
   $ 3,164      $ 6,229      $ 6,528  

 

 

(6) Fair value of financial instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The carrying amounts of the Company’s cash equivalents, accounts receivable and accounts payable approximate fair value due to their relatively short maturities.

The Company classifies its cash equivalents, which are comprised primarily of money market funds, within Level 1, as it uses quoted market prices in the determination of fair value.

During April 2018, the Company issued notes receivable that include embedded derivative features that were determined to require bifurcation and separate accounting at estimated fair value (see Note 17 of these consolidated financial statements). The Company estimated the fair value of the embedded derivative based on the estimated cash flows associated with the note receivable, which is a technique using Level 3 inputs. The inputs used to determine the estimated fair value of the embedded derivative instrument include the probability of an underlying event triggering the redemption event and its timing prior to the maturity date of the notes receivable. The fair value measurement is based upon significant inputs not observable in the market. These assumptions are inherently subjective and involve significant management judgement.

 

F-23


Table of Contents

The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy (in thousands):

 

                                                                                                                           
         
      December 31,
2018
     Quoted prices
in active
markets for
identical
assets
(level 1)
     Significant
other
observable
inputs
(level 2)
     Significant
unobservable
inputs
(level 3)
 

Assets

           

Cash and cash equivalents

   $ 27,439      $ 27,439      $      $  

Convertible note derivative

     218                      218  
  

 

 

 

Total

   $ 27,657      $ 27,439      $      $ 218  

 

         
      December 31,
2019
     Quoted prices
in active
markets for
identical
assets
(level 1)
     Significant
other
observable
inputs
(level 2)
     Significant
unobservable
inputs
(level 3)
 

Assets

           

Cash and cash equivalents

   $ 28,035      $ 28,035      $      $  
  

 

 

 

Total

   $ 28,035      $ 28,035      $      $  

 

         
      March 31,
2020
     Quoted prices
in active
markets for
identical
assets
(level 1)
     Significant
other
observable
inputs
(level 2)
     Significant
unobservable
inputs
(level 3)
 
     (unaudited)  

Assets

           

Cash and cash equivalents

   $ 28,121      $ 28,121      $      $  
  

 

 

 

Total

   $ 28,121      $ 28,121      $      $  

The carrying values and fair values of the Company’s financial instruments not measured at fair value were as follows (in thousands):

 

     
     December 31,      March 31,
2020
 
      2018      2019  
      Carrying
value
     Fair value      Carrying
value
     Fair value      Carrying
value
     Fair value  
                                 (unaudited)  

Long-term debt, including current maturities

   $ 19,763      $ 26,106      $ 19,827      $ 21,392      $ 19,843      $ 21,935  

 

    

 

 

 

The Company estimated fair value of its long-term debt using a market-based approach that considers an average cost of debt. The Company has incorporated its own credit risk for all liability fair value measurements. Such fair value measurements are considered Level 2 under the fair value hierarchy.

The Company did not have any transfers of financial assets measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3 for any of the periods presented.

 

F-24


Table of Contents

(7) Property and equipment, net

Property and equipment, net comprised the following (in thousands):

 

     
     December 31,     March 31,
2020
 
      2018     2019  
                 (unaudited)  

Equipment, tooling and molds

   $ 16,171     $ 19,510     $ 19,943  

Computer software and equipment

     1,711       1,905       2,076  

Furniture, fixtures and other

     1,019       1,599       1,695  

Leasehold improvements

     5,060       5,283       5,304  

Construction in process

     104       342       184  
  

 

 

 

Total property and equipment

   $ 24,065     $ 28,639     $ 29,202  

Less: Accumulated depreciation

     (9,961     (12,167     (13,337
  

 

 

 

Property and equipment, net

   $ 14,104     $ 16,472     $ 15,865  

 

 

Total depreciation expense for the years ended December 31, 2018 and 2019 was $4.2 million and $4.8 million, respectively. Total depreciation expense for the three months ended March 31, 2019 and 2020 (unaudited) was $1.2 million and $1.3 million, respectively.

During the years ended December 31, 2018 and 2019, the Company recorded losses for the impairment and disposal of certain assets totaling $0.7 million and $0.8 million, respectively. During the three months ended March 31, 2019 and 2020 (unaudited), the Company recorded losses of the impairment and disposal of certain assets totaling $31,000 and $13,000, respectively. These losses for the periods presented were primarily related to lab equipment and other supplies that were determined to be no longer usable.

(8) Leases

The Company leases office and laboratory facilities in Emeryville, California under multiple operating leases that expire in December 2023. The Company also leases multiple office facilities in Shanghai, China under operating leases that expires at various dates, the latest of which is February 2022. Some of the Emeryville leases contain options to early terminate the lease and options to extend the lease for an additional term. However, the Company is not reasonably assured to exercise any of these options. The monthly base rental rate of the leases is subject to adjustment upon renewal based on then current market rental conditions.

The maturity of the Company’s operating lease liabilities as of December 31, 2019 is as follows (in thousands):

 

   
      Operating leases  

Undiscounted lease payments:

  

2020

   $ 2,529  

2021

     2,591  

2022

     2,387  

2023

     2,402  

Thereafter

      
  

 

 

 

Total undiscounted lease payments

     9,909  

Less: implied interest

     (1,059
  

 

 

 

Present value of operating lease payments

     8,850  

Less: current portion

     (2,067
  

 

 

 

Total long-term operating lease liabilities

   $ 6,783  

 

 

 

F-25


Table of Contents

The maturity of the Company’s operating lease liabilities as of March 31, 2020 (unaudited) is as follows (in thousands):

 

   
      Operating leases  
     (unaudited)  

Undiscounted lease payments:

  

Remainder of 2020

   $ 1,910  

2021

     2,591  

2022

     2,387  

2023

     2,402  

Thereafter

      
  

 

 

 

Total undiscounted lease payments

     9,290  

Less: implied interest

     (932
  

 

 

 

Present value of operating lease payments

     8,358  

Less: current portion

     (2,118
  

 

 

 

Total long-term operating lease liabilities

   $ 6,240  

 

 

The Company’s future undiscounted lease payments under operating leases (as defined by prior guidance) as of December 31, 2018 are as follows (in thousands):

 

   
      Rent
payments
 

Year ending December 31:

  

2019

   $ 2,166  

2020

     2,219  

2021

     2,264  

2022

     2,332  

2023

     2,402  

Thereafter

      
  

 

 

 

Total minimum lease payments

   $ 11,383  

 

 

Rent expense for the years ended December 31, 2018 and 2019 was $2.0 million and $2.2 million, respectively. Rent expense for the three months ended March 31, 2019 and 2020 (unaudited) was $0.5 million and $0.6 million, respectively. Under the terms of the lease agreements, the Company is also responsible for certain variable lease payments that are not included in the measurement of the lease liability. Variable lease payments for operating leases were $1.0 million for the year ended December 31, 2019 and $0.3 million for the three months ended March 31, 2020 (unaudited), including non-lease components such as common area maintenance fees.

 

F-26


Table of Contents

The following information represents supplemental disclosure for the statement of cash flows related to operating leases (in thousands):

 

     
      Year ended
December 31,
2019
    

Three months ended
March 31,

2020

 
            (unaudited)  

Right-of-use assets obtained in exchange for new operating lease upon adoption of ASC 842

   $ 8,674      $  

Right-of-use assets obtained for new operating lease liabilities

     784         

Cash paid for amounts included in the measurement of lease liabilities

     2,324        619  

 

 

The following summarizes additional information related to operating leases:

 

     
      December 31,
2019
     March 31,
2020
 
            (unaudited)  

Weighted-average remaining lease term (years)

     3.83        3.58  

Weighted average discount rate

     6.00%        6.00%  

 

 

The Company also enters into leasing transactions in which the Company is the lessor that to date have been classified as sales-type leases. See Note 4 of these consolidated financial statements for the related lease disclosures.

(9) Notes payable

In August 2016, the Company entered into a Growth Capital Loan and Security Agreement with TriplePoint Capital LLC (the “TP Loan Agreement”), as amended in December 2016. The Loan Agreement provided for total borrowings of $25.0 million to be made available to the Company in two separate tranches. The first tranche, for $20.0 million, was available immediately through December 31, 2016, while the second tranche, for $5.0 million, was available to the Company upon its first shipment of a commercial unit, up to and through December 31, 2016. The Company drew down $20.0 million on the TP Loan Agreement in December 2016. Upon closing of the TP Loan Agreement, the Company paid a facility fee of $0.3 million and issued a warrant to TriplePoint Capital LLC to purchase 136,519 shares of Series C convertible preferred stock at $5.86 per share with an initial fair value of $0.3 million (see Note 10 of these consolidated financial statements). These amounts were accounted for as loan commitment fees and were recorded as an asset upon issuance and amortized as interest expense over the term of the commitment, which expired on December 31, 2016.

In May 2018, the Company entered into a Loan and Security Agreement with East West Bank (the “EWB Loan Agreement”), which served to refinance the TP Loan Agreement in full. In conjunction with this refinancing, the Company repaid a total of $19.7 million to TriplePoint, such amount consisting of the total principal amount due, the final termination payment and certain legal fees and interest amounts, offset by advance payments made at the outset of the TP Loan Agreement. As a result of this refinancing and termination of the TP Loan Agreement, the Company recorded a loss on extinguishment of the TP Loan Agreement in the amount of $0.3 million, primarily associated with the acceleration of the final termination payment for the TP Loan Agreement, such amount being recorded as interest expense in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2018. Net proceeds to the Company from this refinancing were $0.3 million, before considering debt issuance costs incurred related to the financing of $0.3 million. These costs have been recorded against the debt balance and are being amortized as interest expense over the term of the debt arrangement.

 

F-27


Table of Contents

The EWB Loan Agreement has a term of 48 months and carries an interest only period of 24 months from the draw date in May 2018, such interest only period subject to extension based on certain cash and revenue metrics. The note payable is collateralized by substantially all the assets of the Company, excluding intellectual property, which is subject to a negative pledge. The note carries an interest rate of 6.73% per annum.

The EWB Loan Agreement contains customary negative covenants that limit the Company’s ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets and merge or consolidate. The EWB Loan Agreement also contains customary affirmative covenants, including requirements to, among other things, deliver audited financial statements. In addition, the EWB Loan Agreement contains covenants associated with cash holdings with East West Bank and ratios of cash to cash burn. As of December 31, 2019 and March 31, 2020 (unaudited), the Company was in compliance with the terms and covenants of the EWB Loan Agreement.

The following is a schedule of payments due on notes payable as of December 31, 2019 (in thousands):

 

   
      Amount  

Year Ending December 31:

  

2020

   $ 7,098  

2021

     10,654  

2022

     4,237  
  

 

 

 

Total payments due

     21,989  

Less:

  

Interest payments, loan discounts and finanncing costs

     (2,162

Current portion, less loan discounts and financing costs

     (5,765
  

 

 

 

Notes payable, net of current portion

   $ 14,062  

 

 

The following is a schedule of payments due on notes payable as of March 31, 2020 (unaudited) (in thousands):

 

   
      March 31,
2020
 
     (unaudited)  

Year Ending December 31:

  

Remainder of 2020

   $ 1,028  

2021

     12,832  

2022

     8,475  
  

 

 

 

Total payments due

     22,335  

Less:

  

Interest payments, loan discounts and financing costs

     (2,492

Current portion, less loan discounts and financing costs

      
  

 

 

 

Notes payable, net of current portion

   $ 19,843  

 

 

Total interest cost incurred, excluding the loss on debt extinguishment, for the years ended December 31, 2018 and 2019 was $1.9 million and $1.4 million, respectively. Total interest cost incurred for both the three months ended March 31, 2019 and 2020 (unaudited) was $0.4 million.

 

F-28


Table of Contents

(10) Stockholder’s equity

Common stock

As of December 31, 2019 and March 31, 2020 (unaudited), the Company has authorized for issuance 124,433,107 and 130,600,000 shares of common stock, respectively, at $0.00005 par value. Holders of common stock are entitled to one vote per share, and to receive dividends and, upon liquidation or dissolution, are entitled to receive all assets available for distribution to stockholders. The holders have no preemptive or other subscription rights. Common stock is subordinate to the preferred stock with respect to dividend rights and rights upon liquidation, winding up and dissolution of the Company.

Convertible preferred stock

Convertible preferred stock at December 31, 2018 consists of the following (in thousands, except share data):

 

         
Series    Shares
authorized
     Shares
issued and
outstanding
     Proceeds, net
of issuance
costs
     Aggregate
liquidition
amount
 

Series A

     7,320,000        3,660,000      $ 179      $ 183  

Series A-1

     3,000,002        1,500,000        493        500  

Series A-2

     14,049,876        7,024,937        3,993        4,000  

Series B

     27,184,683        13,592,338        29,069        29,169  

Series C

     20,000,000        9,637,965        56,435        56,478  

Series D

     11,886,839        5,943,415        39,806        46,880  

Series E

     18,207,257        9,103,617        94,794        95,000  
  

 

 

 
     101,648,657        50,462,272      $ 224,769      $ 232,210  

 

 

Convertible preferred stock at December 31, 2019 consists of the following (in thousands, except share data):

 

         
Series    Shares
authorized
     Shares
issued and
outstanding
     Proceeds, net
of issuance
costs
     Aggregate
liquidition
amount
 

Series A

     7,320,000        3,660,000      $ 179      $ 183  

Series A-1

     3,000,002        1,500,000        493        500  

Series A-2

     14,049,876        7,024,937        3,993        4,000  

Series B

     27,184,683        13,592,338        29,069        29,169  

Series C

     20,000,000        9,637,965        56,435        56,478  

Series D

     11,886,839        5,943,415        39,806        50,077  

Series E

     18,207,257        9,103,617        94,794        95,000  
  

 

 

 
     101,648,657        50,462,272      $ 224,769      $ 235,407  

 

 

 

F-29


Table of Contents

Convertible preferred stock at March 31, 2020 (unaudited) consists of the following (in thousands, except share data):

 

         
Series    Shares
authorized
     Shares
issued and
outstanding
     Proceeds, net
of issuance
costs
     Aggregate
liquidition
amount
 

Series A

     7,320,000        3,660,000      $ 179      $ 183  

Series A-1

     3,000,002        1,500,000        493        500  

Series A-2

     14,049,876        7,024,937        3,993        4,000  

Series B

     27,184,683        13,592,338        29,069        29,169  

Series C

     20,000,000        9,637,965        56,435        56,478  

Series D

     11,886,839        5,943,415        39,806        50,875  

Series E

     18,207,257        9,103,617        94,794        95,000  
  

 

 

 
     101,648,657        50,462,272      $ 224,769      $ 236,205  

 

 

The rights, preferences and privileges of the Series A, Series A-1, A-2, Series B, Series C, Series D and Series E convertible preferred stock are as follows:

Voting

Each holder of outstanding shares of Series A, Series A-1, Series A-2, Series B, Series C, Series D and Series E convertible preferred stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which such holder’s shares of Series A, Series A-1, Series A-2, Series B, Series C, Series D and Series E are convertible as of the record date. The holders of the Series B, Series C, Series D and Series E convertible preferred stock have certain protective provisions related to the amendment of the Company’s certificate of incorporation and the increase or decrease in the number of authorized shares of their respective convertible preferred stock. Such changes require vote or written consent of the holders voting as a separate series, of at least 60% of the stock outstanding in the case of the Series B convertible preferred stock, a majority of the holders of the Series C convertible preferred stock, a majority of the Series D convertible preferred stock and a majority of the Series E convertible preferred stock.

Dividends

The holders of the Series E convertible preferred stock are entitled to receive, when and if declared by the Board of Directors, a non-cumulative dividend in the amount equal to 8% of the original purchase price ($10.4354 per share). After payment, declaration or setting apart of any dividends declared for the Series E convertible preferred stock, the holders of the Series D convertible preferred stock are entitled to receive a cumulative dividend at the annual rate of $0.538 per share, such dividends being payable only when, as, and if declared by the Board of Directors. After payment, declaration or setting apart of any dividends declared for the Series E and Series D convertible preferred stock, the holders of the outstanding shares of Series B and Series C convertible preferred stock (the ‘Prior Senior Preferred Stock’) are entitled to receive, when and if declared by the Board of Directors, a non-cumulative dividend in the amount equal to 8% of the original purchase price ($2.146 per share for Series B shares and $5.86 per share for Series C shares). After payment, declaration or setting apart of any dividends declared for the Series E convertible preferred stock, Series D convertible preferred stock and Prior Senior Preferred Stock, the holders of the outstanding shares of the Series A, Series A-1, and Series A-2 convertible preferred stock (the ‘Junior Preferred Stock’) are entitled to receive, when and if declared by the Board of Directors, a non-cumulative dividend in the amount equal to 8% of the original purchase price ($0.05 per share for Series A shares, $0.3334 per share for Series A-1 shares and $0.5694 per share for Series A-2 shares). Such dividends are payable in preference to any dividends for common stock declared by the Board of Directors.

 

F-30


Table of Contents

As of December 31, 2019 and March 31, 2020 (unaudited), a total of $10.1 million and $10.9 million of dividends, respectively, had accumulated on the Company’s Series D convertible preferred stock. No dividends have been declared or paid to date.

Conversion

Each share of Series A, Series A-1, Series A-2, Series B, Series C, Series D and Series E convertible preferred stock is convertible, at the option of the holder, at any time, into shares of common stock. At December 31, 2018 and 2019, each share of Series A, Series A-1, Series A-2, Series B, Series C, Series D and Series E convertible preferred stock is convertible into one share of common stock. As of December 31, 2018 and 2019, the conversion prices per share for all series of convertible preferred stock were equal to the original issue prices and the rate at which each share would convert into common stock was one-for-one.

In the event that the Company, at any time after the original issuance date of any series of convertible preferred stock, issues additional shares of common stock (including convertible securities) without consideration or for consideration per share that is less than the conversion price of a particular series of preferred stock in effect on the date of and immediately prior to such issuance, then and in such event, the conversion price of that series shall be reduced, concurrently with such issuance.

Each share of Series A, Series A-1, Series A-2, Series B, Series C, Series D and Series E convertible preferred stock will automatically convert into shares of common stock at the then effective conversion price for each such share immediately upon the earlier of (i) the Company’s sale of its common stock in an underwritten public offering pursuant to a registration statement under the Securities Act resulting in aggregate gross proceeds to the Company of at least $70.0 million, or (ii) the date specified by the written consent or agreement of the holders of at least 60% of the then outstanding shares of Series A, Series A-1, Series A-2, Series B, Series C, Series D and Series E convertible preferred stock, voting together as a single class on an as-converted basis.

Liquidation

Upon liquidation, dissolution, or winding up of the Company, or upon a change of control or a sale of substantially all of the Company’s assets, the holders of outstanding Series E convertible preferred stock shall be entitled to receive, prior and in preference to any distribution to the holders of the Series D convertible preferred stock, Prior Senior Preferred Stock, Junior Preferred stock and common stock, an amount per share equal to the greater of (i) the original issue price plus any dividends accrued but unpaid thereon, or (ii) an amount that would have been paid had such share been converted into common stock immediately prior to such liquidation.

After distribution to the Series E convertible preferred stock holders, holders of the Series D convertible preferred stock shall be entitled to receive, an amount per share equal to the greater of (i) the original issue price plus any dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid, or (ii) an amount that would have been paid had such share been converted into common stock immediately prior to such liquidation.

After distribution to the Series D convertible preferred stock holders, holders of the Prior Senior Preferred Stock shall be entitled to receive, prior and in preference to any distribution to the holders of shares of common stock or the Junior Preferred Stock, an amount per share equal to the greater of (i) the original issue price plus any dividends declared but unpaid, or (ii) an amount that would have been paid had such share been converted into common stock immediately prior to such liquidation.

 

F-31


Table of Contents

After distribution to the holders of the Prior Senior Preferred Stock, the holders of outstanding Junior Preferred Stock shall be entitled to receive, prior and in preference to any distribution to the holders of shares of common stock, an amount per share equal to the greater of (i) the original issue price plus any dividends declared but unpaid thereon, or (ii) an amount that would have been payable had such share been converted into common stock immediately prior to such liquidation.

The remaining assets will be distributed to holders of the Company’s common stock.

Other matters

The convertible preferred stock is not redeemable.

Warrants to purchase convertible preferred stock

In connection with entering into the TP Loan Agreement (see Note 9 to these consolidated financial statements), the Company issued to TriplePoint Capital LLC a warrant to purchase 136,519 shares of Series C convertible preferred stock at an exercise price set at the lower of: (i) $5.86 per share or (ii) the lowest price per share in the next round of equity financing. The term of the warrant is the greater of seven years from the issuance date or five years from the effective date of an initial public offering. If not exercised prior to or in connection with an initial public offering, upon the consummation of an initial public offering the warrant shall become exercisable to purchase 136,519 shares of the Company’s common stock.

The Company’s convertible preferred stock warrants were recorded to additional paid-in capital at fair value as of the date of issuance using the Black-Scholes valuation model. The fair value of the warrants at issuance was estimated at $0.3 million using the following assumptions: fair value of Series C convertible preferred stock shares on the issuance date of $5.86, risk-free interest rate of 1.45%, contractual term of 7 years, no anticipated dividends, and estimated volatility of 44.2%. The initial amount was accounted for as loan commitment fees and recorded as an asset upon issuance and amortized as interest expense over the term of the commitment, which expired on December 31, 2016.

(11) Stock compensation plan

Equity incentive plans

In 2011, the Company adopted the 2011 Equity Incentive Plan, as amended (the “Plan”), pursuant to which the Company’s Board of Directors may grant incentive and nonqualified stock options, as well as non-vested shares, to employees, directors and consultants of the Company. To date, the Company has granted non-vested shares and stock options settleable in shares. Stock options can be granted with an exercise price less than, equal to or greater than the stock’s fair value at the date of grant. The exercise price of an incentive stock option and nonqualified stock option granted to a 10% stockholder shall not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. Stock-option awards generally have 10-year terms, except for incentive stock option awards to 10% stockholders which have 5-year terms, and awards to employees generally vest and become fully exercisable after 4 years of service from the date of grant.

At December 31, 2019 and March 31, 2020 (unaudited), the Plan provided for 12,628,347 shares to be reserved and available for grant and issuance pursuant to the Plan, of which 2,061,984 and 904,693 unissued shares, respectively, remain available for the Company to grant under the Plan.

 

F-32


Table of Contents

Stock option activity

Stock option activity during the periods indicated is as follows (in thousands except share and per share data):

 

         
      Number of
options
outstanding
    Weighted
average
exercise
price
     Weighted
average
remaining
contractual
term
(years)
     Aggregate
intrinsic
value
 

Balance at December 31, 2018

     6,383,104     $ 2.30        7.90      $ 25,271  

Options granted

     4,264,036       7.54        

Options exercised

     (382,803     2.66        

Options cancelled

     (956,301     4.74        
  

 

 

         

Balance at December 31, 2019

     9,308,036     $ 4.44        7.89      $ 42,289  

Options granted (unaudited)

     1,256,270       11.06        

Options exercised (unaudited)

     (8,580     2.50        

Options cancelled (unaudited)

     (98,979     7.20        
  

 

 

         

Balance at March 31, 2020 (unaudited)

     10,456,747     $ 5.20        7.91      $ 61,194  
  

 

 

 

Unvested and expected to vest at December 31, 2019

     4,854,542     $ 6.26        6.94      $ 13,414  
  

 

 

 

Exercisable at December 31, 2019

     4,453,494     $ 2.46        6.71      $ 29,068  
  

 

 

 

Unvested and expected to vest at March 31, 2020 (unaudited)

     5,596,470     $ 7.48        9.08      $ 20,030  
  

 

 

 

Exercisable at March 31, 2020 (unaudited)

     4,860,277     $ 2.60        6.56      $ 41,164  

 

 

Amounts in the table above are inclusive of performance-based stock options as well as early exercised options, as discussed in more detail below.

The Company currently uses authorized and unissued shares to satisfy share award exercises.

During the years ended December 31, 2018 and 2019, the Company granted 1,086,065 and 4,264,036 stock options, respectively, with a weighted-average grant date fair value of $1.86 per share and $3.24 per share, respectively. The aggregate intrinsic value of options exercised was $0.6 million and $2.0 million for the years ended December 31, 2018 and 2019, respectively. During the three months ended March 31, 2019 and 2020 (unaudited), the Company granted 2,071,739 and 1,256,270 stock options, respectively, with a weighted-average grant date fair value of $2.84 per share and $4.80 per share, respectively. The aggregate intrinsic value of options exercised was $0.4 million and $0.1 million for the three months ended March 31, 2019 and March 31, 2020 (unaudited), respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company’s common stock at the date of exercise.

 

F-33


Table of Contents

Stock-based compensation expense

Stock-based compensation related to the Company’s stock-based awards was recorded as an expense and allocated as follows (in thousands):

 

     
     Year ended
December 31,
     Three months
ended March 31,
 
      2018      2019      2019      2020  
                   (unaudited)  

Cost of sales

   $      $      $      $ 6  

Research and development

     1,040        1,672        398        511  

General and administrative

     678        1,763        324        529  

Sales and marketing

     268        325        92        133  
  

 

 

 

Total stock-based compensation

   $ 1,986      $ 3,760      $ 814      $ 1,179  

 

 

At December 31, 2019 and March 31, 2020 (unaudited), there was $10.4 million and $15.0 million, respectively, of total unrecognized compensation cost related to unvested stock options granted under the Plan, which is expected to be recognized over a weighted average period of 3.03 years and 3.16 years, respectively.

There was no capitalized stock-based compensation during the years ended December 31, 2018 or 2019 as such costs subject to capitalization were immaterial. At March 31, 2020 (unaudited), capitalized stock-based compensation totaled $34,000.

Stock-based compensation associated with awards to employees

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The valuation model for stock compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term (weighted-average period of time that the options granted are expected to be outstanding), volatility of the Company’s common stock and an assumed-risk-free interest rate. The fair value of employee stock options was estimated using the following weighted-average valuation assumptions was as follows:

 

     
     Year ended
December 31,
     Three months
ended March 31,
 
      2018      2019      2019      2020  
                   (unaudited)  

Expected dividend yield

     —%        —%        —%        —%  

Expected volatility

     43.1%        44.5%        44.3%        45.2%  

Expected term (years)

     6.04        6.02        6.01        5.99  

Risk-free interest rate

     2.65%        2.20%        2.49%        0.74%  

 

 

Fair Value of Common Stock.    The fair value of the shares of common stock underlying the stock options has historically been determined by the Board of Directors. Because there has been no public market for the Company’s common stock, the Board of Directors has determined fair value of the common stock at the time of grant of the option by considering a number of objective and subjective factors including valuation of comparable companies, sales of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock, and general and industry specific economic outlook, amongst other factors. In determining the fair value of the common stock, the methodologies used to estimate the enterprise value were performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants Accounting Practice Aid, Valuation of

 

F-34


Table of Contents

Privately-Held-Company Equity Securities Issued as Compensation. The fair value of the underlying common stock will be determined by the Board of Directors, after consideration of a third party valuation report, until the Company’s common stock is listed on an established stock exchange or national market system.

Expected Volatility.    Since the Company is a private entity with no historical data regarding the volatility of its common stock, the expected volatility used is based on volatility of a group of similar entities, referred to as “guideline” companies. In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size.

Expected Term.    The Company derived the expected term using the “simplified” method (the expected term is determined as the average of the time-to-vesting and the contractual life of the options), as the Company had limited historical information to develop expectations about future exercise patterns and post vesting employment termination behavior.

Risk-Free Interest Rate.    The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

Dividend Yield.    The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

Performance stock options

From time to time the Company may issue stock options that vest based on certain performance criteria. During the year ended December 31, 2019, the Company granted 1,000,000 such performance stock options to the Company’s Chief Executive Officer, which are accounted for as equity awards. The number of units that ultimately vest depends on achieving certain performance criteria and can range from 0% to 100% of the number of units granted. The performance criteria relate to nine objectives specific to the role of the executive and were established and approved by the Board of Directors. Each of the performance-based stock options represents the contingent right to receive one share of the Company’s common stock if the vesting conditions are satisfied. Compensation expense related to these grants is based on the grant date fair value of the award and recorded from the period that achievement is determined to be probable through the stated service period associated with the award. As of December 31, 2019 and March 31, 2020 (unaudited), the Company considered one of the nine objectives probable of achievement and began recognizing expense for that portion of the award over the remaining service period.

Early exercise of options

Stock options granted under the Plan provide for certain employee and director option holders the right to exercise unvested options in exchange for restricted shares of common stock which are subject to repurchase by the Company at the original issuance price in the event the optionee’s employment is terminated either voluntarily or involuntarily prior to the applicable vesting date. The consideration received for the early exercised options is recorded as a liability on the consolidated balance sheets and reclassified to stockholders’ deficit as the shares vest. As of December 31, 2019 and March 31, 2020 (unaudited), the total repurchase liability related to the unvested early exercised options was $0.3 million and $0.2 million, respectively, which is included in other current and noncurrent liabilities on the consolidated balance sheets. There were no shares subject to repurchase as of December 31, 2018.

 

F-35


Table of Contents

A summary of these restricted shares issued under the Plan is as follows:

 

     
      Shares     Weighted
average
grant-date
fair value
 

Outstanding and unvested as of December 31, 2018

         $  

Issued

     46,719       3.94  

Vested

     (9,844     3.94  

Forfeited or repurchased

            
  

 

 

   

Outstanding and unvested as of December 31, 2019

     36,875     $ 3.94  

Issued (unaudited)

            

Vested (unaudited)

     (9,843     3.94  

Forfeited or repurchased (unaudited)

            
  

 

 

   

Outstanding and unvested as of March 31, 2020 (unaudited)

     27,032     $ 3.94  

 

 

Stock-based compensation associated with awards to non-employees

Since its inception, from time to time the Company has issued stock-based awards to non-employees, primarily in the form of stock options. Stock-based compensation expense related to stock-based awards to non-employees is recognized as the stock-based awards are earned, generally through the provision of services. The Company believes that the fair value of the stock-based awards is more reliably measurable than the fair value of the services received. During the years ended December 31, 2018 and 2019, the Company granted 62,500 and 102,500 stock-based awards, respectively, to certain non-employees that vest over periods ranging from 1 to 3 years. Stock-based compensation expense related to non-employee awards was $0.5 million, and $0.7 million for the years ended December 31, 2018 and 2019, respectively. During the three months ended March 31, 2019 and 2020 (unaudited), the Company granted 100,000 and 157,500 stock-based awards, respectively, to certain non-employees that vest over periods ranging from 1 to 3 years. Stock-based compensation expense related to non-employee awards was $0.2 million, and $0.1 million for the three months ended March 31, 2019 and 2020 (unaudited), respectively.

The fair value of non-employee stock options was estimated using the following weighted-average valuation assumptions was as follows:

 

     
     Years ended
December 31,
     Three months
ended March 31,
 
      2018      2019      2019      2020  
                   (unaudited)  

Expected dividend yield

     —%        —%        —%        —%  

Expected volatility

     45.9%        44.2%        44.2%        48.8%  

Expected term (years)

     9.56        5.44        5.46        5.77  

Risk-free interest rate

     2.74%        2.20%        2.22%        0.44%  

 

 

These assumptions are determined in a manner consistent with those of the option awards granted to employees other than the expected term, which is based on the contractual term of the award.

 

F-36


Table of Contents

(12) Income taxes

Income taxes

For the years ended December 31, 2018 and 2019, income from continuing operations before taxes consisted primarily of amounts related to U.S. operations, as income associated with the Company’s foreign operations was not material. Income tax expense attributable to income from continuing operations consists of (in thousands):

 

     
      2018      2019  

Current provision:

     

Federal

   $ 57      $ 24  

State

     12        45  
  

 

 

 

Total current provision

     69        69  
  

 

 

 

Deferred provision:

     

Federal

             

State

             
  

 

 

 

Total deferred provision

             
  

 

 

 

Total provision

   $ 69      $ 69  

 

 

Tax rate reconciliation

Income tax expense attributable to income from continuing operations was $0.1 million for both of the years ended December 31, 2018 and 2019, respectively, and differed from the amounts computed by applying the U.S. federal statutory income tax rate to loss from continuing operations as a result of the following (in thousands):

 

     
      2018     2019  

Tax benefit at federal statutory rate

   $ (4,866   $ (3,829

State income taxes

     (571     (341

Foreign rate differential

     (2     21  

Research and development credits

     (1,900     (2,312

Change in unrecognized tax benefits

     712       867  

Non-deductible stock-based compensation

     211       320  

Non-deductible permanent expenses

     173       20  

Other

     89       (127

Change in valuation allowance

     6,223       5,450  
  

 

 

 

Provision for income taxes

   $ 69     $ 69  

 

 

 

F-37


Table of Contents

Significant components of deferred taxes

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2018 and 2019 are presented below (in thousands):

 

     
      2018     2019  

Deferred tax assets:

    

Net operating loss carryforwards

   $ 34,682     $ 38,361  

Income tax credit carryforwards

     5,175       6,620  

Accruals and reserves

     1,382       1,369  

Deferred revenue

     2,294       2,582  

Operating lease liability

           2,050  

Stock-based compensation

     377       788  
  

 

 

 

Total gross deferred tax assets

     43,910       51,770  

Less valuation allowance

     (40,274     (45,507
  

 

 

 

Net deferred tax assets

     3,636       6,263  
  

 

 

 

Deferred tax liabilities:

    

Contract assets

     (156     (1,213

Receivables and deferred costs

     (3,008     (2,540

Operating lease right-of-use asset

           (1,803

Prepaid assets

     (217     (337

Depreciation expense

     (255     (370
  

 

 

 

Total gross deferred tax liabilities

     (3,636     (6,263
  

 

 

 

Net deferred tax assets

   $     $  

 

 

As of December 31, 2019, the Company had federal, California and other state net operating loss carryforwards of $142.9 million, $71.6 million and $49.9 million, respectively. The federal net operating losses incurred before January 1, 2018 and California net operating losses will begin to expire in 2031. The federal net operating losses incurred in 2018 and beyond do not expire. The net operating losses in the other states will begin to expire in 2035. As of December 31, 2019, the Company had credit carryforwards of approximately $6.5 million and $5.7 million available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. The federal research and development credit carryforwards expire beginning 2031, and California state credits can be carried forward indefinitely.

Management believes that, based on a number of factors, which includes the Company’s historical operating performance and accumulated deficit, it is more likely than not that the deferred tax assets will not be utilized, such that a full valuation allowance has been recorded against the Company’s deferred tax assets. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Such assessment is required on a jurisdiction by jurisdiction basis. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

 

F-38


Table of Contents

The valuation allowance for deferred tax assets consisted of the following activity for the years ended December 31, 2018 and 2019 (in thousands):

 

     
      2018      2019  

Balance, beginning of year

   $ 33,834      $ 40,274  

Additions to valuation allowance

     6,440        5,233  
  

 

 

 

Balance, end of year

   $ 40,274      $ 45,507  

 

 

The Company intends to continue maintaining a full valuation allowance on its deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.

Utilization of net operating losses and tax credit carryforwards may be limited by ownership change rules, as defined in Section 382 of the Internal Revenue Code (“Section 382”). Similar rules may apply under state tax laws. Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. The Company has assessed the application of Section 382 during the year ended December 31, 2018, and concluded no limitation currently applies, and the Company will continue to monitor activities in the future. In the event the Company had subsequent changes in ownership, net operating losses and research and development credit carry-overs, which are reserved by the full deferred tax asset valuation allowance, could be limited and may expire unutilized.

During the years ended December 31, 2018 and 2019, the amount of gross unrecognized tax benefits increased by $0.8 million and $1.0 million, respectively. If the total amount of unrecognized tax benefits was recognized, it would not have an impact to the effective tax rate as it would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2018 and 2019 is as follows (in thousands):

 

     
      2018      2019  

Balance, beginning of year

   $ 3,086      $ 3,875  

Increase related to current year tax positions

     789        961  
  

 

 

 

Balance, end of year

   $ 3,875      $ 4,836  

 

 

The Company recognizes interest and penalties related to uncertain tax positions as part of the income tax provision. To date, such interest and penalties have not been material.

The Company files federal and state income tax returns. To date, the Company has not been subject to any federal or state income tax audits. As of December 31, 2019, all tax years remain open to examination.

 

F-39


Table of Contents

(13) Statements of cash flows

The supplemental cash flow information consists of the following (in thousands):

 

     
     Year ended
December 31,
     Three months ended
March 31,
 
      2018     2019          2019          2020  
                 

(unaudited)

 

Cash paid for interest

   $ 1,761     $ 1,361      $ 340      $ 340  
  

 

 

 

Cash paid for income taxes

   $ 1     $ 109      $      $  
  

 

 

 

Accrued issuance costs

   $ (1   $      $      $ 207  
  

 

 

 

Change in accounts payable and accrued liabilities related to purchases of property and equipment

   $ 212     $ 43      $ 109      $ (34
  

 

 

 

Release of repurchase rights on early exercised options

   $     $ 88      $      $ 88  

 

 

(14) Commitments and contingencies

Licensing Agreements

In October of 2011, we entered into a license agreement, which was subsequently amended in March 2016 (the “UC Agreement”), with The Regents of the University of California (the “UC Regents”), pursuant to which UC Regents granted us an exclusive, sublicensable, worldwide license under certain patent rights owned by UC Regents related certain of our products. We paid UC Regents upfront payments totaling $15,000 in connection with executing the UC Agreement. In addition, we issued 250,992 shares of common stock to certain persons associated with UC Regents in July 2013.

We pay UC Regents a sub-single digit percentage royalty on our net sales of certain products covered by the licensed patents, subject to an annual minimum royalty payment of $10,000. The UC Agreement will continue until the expiration of the last to expire patent or last to be abandoned patent application that is licensed to us, unless terminated earlier in accordance with the terms of the UC Agreement.

Legal proceedings

From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. The Company records a liability in its financial statements for these matters when a loss is known and considered probable and the amount can be reasonably estimated. The Company does not recognize gain contingencies until they are realized. Legal costs incurred relating to loss contingencies are expensed as incurred.

The Company is not currently involved in any claims or legal actions, nor is management aware of any potential claims or legal actions, for which the ultimate disposition could have a material adverse effect on the Company’s financial position, results of operations, or liquidity.

Purchase commitments

The Company has entered into various purchase agreements, including inventory-related agreements with its contract manufacturers. Once these orders are placed, they are generally cancelable by providing notice prior to the expected ship date, however such cancelations could result in the Company incurring certain charges depending on the timing. The Company had non-cancellable purchase obligations to contract manufacturers and other suppliers of $10.6 million and $8.5 million at December 31, 2019 and March 31, 2020 (unaudited), respectively.

 

F-40


Table of Contents

Product warranty

The table below represents the activity in the product warranty accrual included in accrued expenses and other current liabilities on the consolidated balance sheets (in thousands):

 

     
     December 31,     March 31,
2020
 
      2018     2019  
                 (unaudited)  

Balance, beginning of period

   $ 295     $ 601     $ 1,065  

Adjustments to existing warranties

     (2     (159     (122

Provision for new warranties

     704       1,430       330  

Settlement of pre-existing warranties

     (396     (807     (80
  

 

 

 

Balance, end of period

   $ 601     $ 1,065     $ 1,193  

 

 

(15) Net loss and unaudited pro forma net loss attributable to common stockholders per share

Potentially issuable shares of common stock include shares issuable upon the exercise of outstanding employee stock option awards. Awards granted with performance conditions are excluded from the shares used to compute diluted earnings per share until the performance conditions associated with the awards are met.

The following table sets forth the computation of basic and diluted earnings per common share (in thousands, except share and per share data):

 

     
     Year ended
December 31,
    Three months
ended March 31,
 
      2018     2019     2019     2020  
                 (unaudited)  

Numerator

        

Net loss

   $ (23,337   $ (18,302   $ (4,205   $ (8,425

Cumulative undeclared dividends on Series D convertible preferred stock

     (3,198     (3,198     (789     (797
  

 

 

 

Net loss attributable to common stockholders, basic and diluted

   $ (26,535   $ (21,500   $ (4,994   $ (9,222
  

 

 

 

Denomintator

        

Weighted-average shares used to compute net income per share, basic and diluted

     2,605,124       2,883,950       2,717,542       3,047,967  
  

 

 

 

Net loss per share

        

Net loss per share attributable to common stockholders, basic and diluted

   $ (10.19   $ (7.46   $ (1.84   $ (3.02

 

 

 

F-41


Table of Contents

Since the Company was in a loss position for all periods presented, basic net loss per share attributable to common stockholders is the same as diluted net loss per share attributable to common stockholders, as the inclusion of all potential shares of common stock outstanding would have been anti-dilutive. The following weighted-average common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented as they had an anti-dilutive effect:

 

     
     Year ended
December 31,
     Three months
ended March 31,
 
      2018      2019      2019      2020  
                   (unaudited)  

Convertible preferred stock (on an if-converted basis)

     50,462,272        50,462,272        50,462,272        50,462,272  

Options to purchase common stock

     6,383,104        9,308,036        8,110,056        10,456,747  

Restricted shares of common stock related to early exercise of options

            36,875               27,032  

Warrants to purchase Series C convertible preferred stock

     136,519        136,519        136,519        136,519  
  

 

 

 

Total

     56,981,895        59,943,702        58,708,847        61,082,570  

 

 

Unaudited pro forma net loss per share

The following table sets forth the computation of the unaudited pro forma basic and diluted net loss per share and gives effect to the conversion of all outstanding convertible preferred stock (in thousands, except share and per share data):

 

     
      Year ended
December 31, 2019
    Three months ended
March 31, 2020
 
    

(unaudited)

 

Numerator

    

Net loss

   $ (18,302   $ (8,425
  

 

 

 

Pro forma net loss attributable to common shareholders, basic and diluted

   $ (18,302   $ (8,425
  

 

 

 

Denominator

    

Weighted-average shares used to compute net loss per share, basic and diluted

     2,883,950       3,047,967  

Weighted-average shares of common stock issued upon assumed conversion of convertible preferred stock in an IPO

     50,462,272       50,462,272  
  

 

 

 

Weighted-average shares used in computing pro forma net loss per share, basic and diluted

     53,346,222       53,510,239  
  

 

 

 

Pro forma net loss per share attributable to common stockholders, basic and diluted

   $ (0.34   $ (0.16

 

 

(16) Equity method investment in joint venture

In 2017 Berkeley Lights entered into agreements with MDACC to form a joint venture, Optera, the purpose of which is, in part, to develop and standardize workflows and protocols to enable healthcare providers to implement proof of concept and/or clinical study protocols and cell processing to select and manipulate

 

F-42


Table of Contents

immune cells using the Company’s technology. Both Berkeley Lights and MDACC received 50% ownership of Optera in consideration for legal fees incurred to set up the new company.

In each of the years ended December 31, 2018 and 2019 the Company entered into a note receivable of $1.0 million, for a total of $2.0 million (see Note 17 to these consolidated financial statements).

The Company accounts for its investment and financial interests in Optera using the equity method of accounting and includes the Company’s proportionate share of the net loss in its consolidated net loss in the statement of operations and comprehensive loss. The total equity losses recorded under this arrangement were $0.8 million during both the years ended December 31, 2018 and 2019, respectively, which are recorded in other income (expense), net in the consolidated statements of operations and comprehensive loss. These losses were recorded as a reserve against the note receivable balances as these amounts were considered part of the Company’s investment in Optera.

Summarized financial information for Optera consists of the following: (in thousands):

 

     
     Year ended
December 31,
     Three months ended
March 31,
 
      2018      2019      2019      2020  
                   (unaudited)  

Total assets

   $ 430      $ 18      $ 852      $  

Total liabilities

     1,269        18        2,319         

Operating expenses

     733        935        624         

Net loss

     734        843        624         

 

 

In May 2019, the Optera Board of Directors determined that Optera would cease operations effective immediately and begin the process of dissolution and winding up of the operations. As a result, the Company impaired the carrying value of its notes receivable and related unpaid interest to reflect the amount expected to be received upon repayment, which was partially offset by the reversal of the Company’s share of equity losses that were recorded as a reserve against the notes receivable. The resulting charge of $0.2 million has been recorded in other income (expense), net on the consolidated statement of operations and comprehensive loss. The dissolution and unwinding of Optera was completed in March 2020.

(17) Convertible note receivable and embedded derivative

In 2018, the Company entered into a note agreement with Optera (the “Optera Note”, see Note 16 to these consolidated financial statements). The Optera Note, which had an original maturity date in April 2019 and carries interest at 4.0%, was amended in December 2018 to extend the maturity date to October 2019. These notes convert automatically into the equity securities issued in the next Optera equity financing round greater than $20.0 million at a 20% discount to the issuance price. Alternatively, upon change of control or IPO, at the option of the holder the notes will either a) become and due and payable in cash or b) convert into common shares. Total amounts issued under the Optera Note were $2.0 million through the year ended December 31, 2019. The balance of the notes receivable, which are reported as prepaid and other current assets in the consolidated balance sheets, was $0.9 million at December 31, 2018 and $10,000 at December 31, 2019.

The discounted conversion rate in the Optera Note is considered a redemption feature that is an embedded derivative requiring bifurcation and separate accounting at its estimated fair value. The estimated fair value of the embedded derivative upon issuance in April 2018 was an asset of $0.2 million. The estimated fair value of this derivative instrument was recognized as a note discount and as an embedded derivative asset on the consolidated balance sheet upon issuance. The Company will amortize the note discount into interest income

 

F-43


Table of Contents

using the effective interest method. Total amortization of the note discount was $0.2 million for the year ended December 31, 2018 and $60,000 for the year ended December 31, 2019.

The Company estimated the fair value of the embedded derivative based on the estimated cash flows associated with the note receivable. The inputs used to determine the estimated fair value of the embedded derivative instrument include the probability of an underlying event triggering the redemption event and its timing prior to the maturity date of the Optera Note. The fair value measurement is based upon significant inputs not observable in the market. These assumptions are inherently subjective and involve significant management judgement.

The embedded derivative requires periodic re-measurements to fair value while the instrument is still outstanding. The change in the estimated value is recorded in other income (expense), net in the consolidated statement of operations and comprehensive loss. The total amount recorded for the change in fair value of the embedded derivative was $18,000 and $0.1 million for the years ended December 31, 2018 and 2019, respectively. Additionally, the Company recorded an impairment in the amount of $0.2 million for the full reduction in the fair value of the asset due to the resolution by the Optera Board of Directors to dissolve Optera (see Note 16 to these consolidated financial statements).

(18) Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company has one business activity and there are no segment managers who are held accountable for operations. Accordingly, the Company has a single reportable segment structure. The Company’s principal operations and decision-making functions are located in the United States.

The following table provides the Company’s revenues by geographical market based on the location where the services were provided or to which product was shipped (in thousands):

 

     
     Year ended
December 31,
     Three months ended
March 31,
 
     2018      2019      2019      2020  
                      (unaudited)  

North America

   $ 20,466      $ 29,862      $ 8,476      $ 8,481  

Asia Pacific

     3,704        14,454        1,868        4,860  

Europe

     7,129        12,377        2,297        437  
  

 

 

 
   $ 31,299      $ 56,693      $ 12,641      $ 13,778  

 

 

North America includes the United States and related territories, as well as Canada. Asia Pacific also includes Australia.

As of December 31, 2018 and 2019 and March 31, 2020 (unaudited), substantially all of the Company’s long-lived assets are located in the United States of America.

 

F-44


Table of Contents

(19) Subsequent events

 

  A)   In March 2020, the EWB Loan Agreement was amended to extend the interest only period by an additional twelve months through May 2021. There were no other changes to the loan agreement associated with this amendment.

 

  B)   Subsequent to year-end, the Company has granted 1,098,770 stock options to employees and 157,500 stock options to non-employees. The options had a weighted-average grant date fair value of $4.80 per share.

 

  C)   On July 10, 2020, the Board of Directors of the Company approved a 1-for-2 reverse stock split of its issued and outstanding common stock and convertible preferred stock to be effective prior to the completion of this offering. All issued and outstanding shares of common stock and convertible preferred stock and related per share amounts contained in the accompanying consolidated financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented. The par value of the authorized stock was not adjusted as a result of the reverse stock split. Other than the par value, all share and per share data shown in the accompanying financial statements and related notes have been retroactively revised to reflect the reverse stock split.

(20) Events (unaudited) subsequent to the date of the report of the Independent Registered Public Accounting Firm

On June 25, 2020, the Company entered into an operating lease for 34,789 square feet of additional space in Emeryville, California, as well as amended its existing lease arrangements to vacate certain existing space and extend the terms of its remaining existing space in Emeryville. The lease for additional space commences October 1, 2020 and all of the leases now expire on March 31, 2028. The total incremental non-cancelable lease payments under the new and amended lease agreements are $20.1 million through the remainder of the updated lease terms.

 

F-45


Table of Contents

7,400,000 shares

 

 

 

 

LOGO

Common stock

Prospectus

 

J.P. Morgan   Morgan Stanley   Cowen
William Blair

Prospectus dated                     , 2020


Table of Contents

Part II

Information not required in prospectus

Item 13. Other expenses of issuance and distribution.

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of our common stock being registered. All amounts are estimates except for the U.S. Securities and Exchange Commission, or the SEC, registration fee, the Financial Industry Regulatory Authority, or FINRA, filing fee and the Nasdaq listing fee.

 

   
Item    Amount paid
or to be paid
 

SEC registration fee

   $ 19,883  

FINRA filing fee

     23,477  

Nasdaq listing fee

     290,000  

Printing and engraving expenses

     500,000  

Legal fees and expenses

     1,200,000  

Accounting fees and expenses

    
750,000
 

Blue Sky qualification fees and expenses

     10,000  

Transfer agent fees and expenses

     6,500  

Miscellaneous expenses

    
200,140
 
  

 

 

 

Total

   $ 3,000,000  

Item 14. Indemnification of directors and officers.

Section 102 of the Delaware General Corporation Law, or the DGCL, permits a corporation to eliminate the personal liability of directors of a corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our amended and restated certificate of incorporation provides that none of our directors shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the DGCL prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.

Section 145 of the DGCL provides that a corporation has the power to indemnify a director, officer, employee or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership, joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he or she was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of

 

II-1


Table of Contents

the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

Our amended and restated bylaws provide that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, a director or officer, or, while a director or officer, is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), liabilities, losses, judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our amended and restated bylaws provide that we will indemnify any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or officer, or, while a director or officer, is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.

We have entered into indemnification agreements with each of our directors and officers. These indemnification agreements may require us, among other things, to indemnify our directors and officers for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of his or her service as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request.

We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims based on acts or omissions in their capacities as directors or officers.

In any underwriting agreement we enter into in connection with the sale of common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, or the Securities Act, against certain liabilities.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. Please read “Item 17. Undertakings” for more information on the SEC’s position regarding such indemnification provisions.

 

II-2


Table of Contents

Item 15. Recent sales of unregistered securities.

The following list sets forth information as to all securities we have sold since January 1, 2017, which were not registered under the Securities Act.

 

1.   In March, April, May, June and September 2018, we issued and sold an aggregate of 9,103,617 shares of our Series E convertible preferred stock to 33 accredited investors at an average price per share of $10.4354, for aggregate gross consideration of approximately $95 million.

 

2.   We granted stock options to purchase an aggregate of 9,622,168 shares of our common stock at a weighted-average exercise price of $5.98 per share, to certain of our employees, consultants and directors in connection with services provided to us by such persons.

 

3.   We issued and sold an aggregate of 1,040,961 shares of common stock at a weighted-average purchase price of $1.87 per share to employees, directors and consultants for aggregate proceeds to us of approximately $2.0 million upon the exercise of stock options.

We claimed exemption from registration under the Securities Act for the sale and issuance of securities in the transactions described in paragraph (1) by virtue of Section 4(a)(2) and/or Regulation D promulgated thereunder as transactions not involving any public offering. All of the purchasers of unregistered securities for which we relied on Section 4(a)(2) and/or Regulation D represented that they were accredited investors as defined under the Securities Act. We claimed such exemption on the basis that (a) the purchasers in each case represented that they intended to acquire the securities for investment only and not with a view to the distribution thereof and that they either received adequate information about the registrant or had access, through employment or other relationships, to such information and (b) appropriate legends were affixed to the stock certificates issued in such transactions.

We claimed exemption from registration under the Securities Act for the sales and issuances of securities in the transactions described in paragraphs (2) and (3) above under Section 4(a)(2) of the Securities Act in that such sales and issuances did not involve a public offering or under Rule 701 promulgated under the Securities Act, in that they were offered and sold either pursuant to written compensatory plans or pursuant to a written contract relating to compensation, as provided by Rule 701.

All of the foregoing securities are deemed restricted securities for purposes of the Securities Act. All certificates representing the issued shares of capital stock described in this Item 15 included appropriate legends setting forth that the securities have not been registered and the applicable restrictions on transfer.

Item 16. Exhibits and financial statement schedules

(a) Exhibits. The following documents are filed as exhibits to this registration statement.

 

       

Exhibit
number

        Incorporated by
reference
   Filed
herewith
   Exhibit description    Form      Date    Number
  1.1    Form of Underwriting Agreement.             X
  3.1    Amended and Restated Certificate of Incorporation, as amended, of Berkeley Lights, Inc., as currently in effect.             X
  3.2    Form of Amended and Restated Certificate of Incorporation, effecting a stock split, to be in effect prior to the effectiveness of this Registration Statement                       X

 

II-3


Table of Contents
       

Exhibit
number

       Incorporated by
reference
   Filed
herewith
  Exhibit description    Form      Date    Number
  3.3   Form of Amended and Restated Certificate of Incorporation of Berkeley Lights, Inc., to become effective upon closing of this offering.             X
  3.4   Bylaws of Berkeley Lights, Inc., as currently in effect.      S-1      06/26/20    3.3   
  3.5   Form of Amended and Restated Bylaws of Berkeley Lights, Inc., to become effective upon closing of this offering.             X
  4.1   Reference is made to exhibits 3.1 through 3.5.            
  4.2   Form of Common Stock Certificate.             X
  4.3   Fifth Amended and Restated Investors’ Rights Agreement, dated March  28, 2018, by and among Berkeley Lights, Inc. and the investors listed therein.      S-1      06/26/20    4.3   
  4.4   Plain English Warrant Agreement, dated August  24, 2016, by and between Berkeley Lights, Inc. and TriplePoint Capital LLC.      S-1      06/26/20    4.4   
  5.1   Opinion of Latham & Watkins LLP.             X
10.1(a)#   Berkeley Lights, Inc. 2011 Equity Incentive Plan, as amended.      S-1      06/26/20    10.1(a)   
10.1(b)#   Form of Notice of Stock Option Grant and Stock Option Agreement under the 2011 Equity Incentive Plan.      S-1      06/26/20    10.1(b)   
10.2(a)#   Berkeley Lights, Inc. 2020 Incentive Award Plan.             X
10.2(b)#   Form of Stock Option Grant Notice and Stock Option Agreement under the 2020 Incentive Award Plan.             X
10.2(c)#   Form of Restricted Stock Award Agreement under the 2020 Incentive Award Plan.             X
10.2(d)#   Form of Restricted Stock Unit Award Grant Notice under the 2020 Incentive Award Plan.             X
10.3#   2020 Employee Stock Purchase Plan.             X
10.4#   Non-Employee Director Compensation Program.             X
10.5   Form of Indemnification Agreement for directors and officers.             X
10.6#   Form Executive Change in Control Severance Agreement             X
10.7#   Employment Agreement, by and between Berkeley Lights, Inc. and Eric Hobbs, Ph.D.             X
10.8#   Employment Agreement, by and between Berkeley Lights, Inc. and Shaun Holt.             X
10.9#   Employment Agreement, by and between Berkeley Lights, Inc. and Keith Breinlinger, Ph.D.                       X

 

II-4


Table of Contents
       

Exhibit
number

       Incorporated by
reference
   Filed
herewith
  Exhibit description    Form      Date    Number
10.10#   Employment Agreement, by and between Berkeley Lights, Inc. and Stuart Merkadeau.             X
10.11#§   Strategic/Scientific Advisor Consulting Agreement, dated as of April  1, 2017, by and between Berkeley Lights, Inc. and James Rothman, Ph.D., as amended.      S-1      06/26/20    10.10   
10.12(a)   Lease, dated as of November 3, 2014, by and between Berkeley Lights, Inc. and Emery Station Joint Venture, LLC, as amended.             X
10.12(b)   Lease, dated as of February 14, 2020, by and between Berkeley Lights, Inc. and Emery Station Office II, LLC.      S-1      06/26/20    10.11(b)   
10.12(c)   Sublease dated as of March  21, 2019, by and between Berkeley Lights, Inc. and Exponential Interactive, Inc.      S-1      06/26/20    10.11(c)   
10.12(d)   Lease, dated as of June 24, 2020, by and between Berkeley Lights, Inc. and Emery Station Office II, LLC.             X
10.13§   Collaboration Agreement, dated as of September  13, 2019, by and between Berkeley Lights, Inc. and Ginkgo Bioworks, Inc.      S-1      06/26/20    10.12   
10.14A§   Exclusive License, dated as of October  25, 2011, by and between Berkeley Lights, Inc. and The Regents of the University of California.      S-1      06/26/20    10.13A   
10.14B§   Amendment to Exclusive License, dated as of March  14, 2016, by and between Berkeley Lights, Inc. and The Regents of the University of California.      S-1      06/26/20    10.13B   
10.15A   Loan and Security Agreement, dated as of May  23, 2018, as amended, by and between Berkeley Lights, Inc. and East West Bank.      S-1      06/26/20    10.14A   
10.15B   First Amendment to Loan and Security Agreement, dated as of April  18, 2019 by and between Berkeley Lights, Inc. and East West Bank.      S-1      06/26/20    10.14B   
10.15C   Second Amendment to Loan and Security Agreement, dated as of March  17, 2020, by and between Berkeley Lights, Inc. and East West Bank.      S-1      06/26/20    10.14C   
10.16A§   Terms and Conditions of Purchase, dated as of February  25, 2015, by and between Berkeley Lights, Inc. and Korvis, LLC.      S-1      06/26/20    10.15A   
10.16B§   Amendment No. 1 to Terms and Conditions of Purchase, dated as of April  23, 2019, by and between Berkeley Lights, Inc. and Korvis, LLC.      S-1      06/26/20    10.15B   
21.1   Subsidiaries of Berkeley Lights, Inc.      S-1      06/26/20    21.1     

 

II-5


Table of Contents
       

Exhibit
number

        Incorporated by
reference
   Filed
herewith
   Exhibit description    Form      Date    Number
23.1    Consent of Independent Registered Public Accounting Firm.             X
23.2    Consent of Latham & Watkins LLP (included in Exhibit 5.1).             X
24.1    Power of Attorney. Reference is made to the signature page to the Registration Statement.      S-1      06/26/20    24.1     

 

*   To be filed by amendment.

 

#   Indicates management contract or compensatory plan.

 

§   Portions of the exhibit, marked by brackets, have been omitted because the omitted information (i) is not material and (ii) would likely cause competitive harm if publicly disclosed.

(b) Financial statement schedules. Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the Financial Statements or notes thereto.

Item 17. Undertakings.

The undersigned Registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification by the Registrant for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registration has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit, or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The Registrant hereby undertakes that:

 

(1)   For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time It was declared effective.

 

(2)   For purposes of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

II-6


Table of Contents

Signatures

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Emeryville, California, on July 13, 2020.

 

Berkeley Lights, Inc.
By:  

/s/ Eric Hobbs, Ph.D.

Name:    Eric Hobbs, Ph.D.
Title:   Chief Executive Officer

Signatures

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

 

     
Name    Title   Date

/s/ Eric Hobbs, Ph.D.

Eric Hobbs, Ph.D.

  

Chief Executive Officer (Principal Executive Officer) and Director

  July 13, 2020

/s/ Shaun Holt

Shaun Holt

  

Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer)

  July 13, 2020

*

Sarah Boyce

  

Director

  July 13, 2020

*

Igor Khandros, Ph.D.

  

Director

  July 13, 2020

*

Gregory Lucier

  

Director

  July 13, 2020

*

Michael Marks

  

Director

  July 13, 2020

*

Michael Moritz

  

Director

  July 13, 2020

*

Elizabeth Nelson

  

Director

  July 13, 2020

*

James Rothman, Ph.D.

  

Director

  July 13, 2020

 

II-7


Table of Contents
     
Name    Title   Date

*

Ming Wu, Ph.D.

  

Director

  July 13, 2020

*

Makoto Shintani

  

Director

  July 13, 2020

 

*By: 

 

/s/ Shaun Holt

Shaun Holt

Attorney-in-Fact

     July 13, 2020

 

II-8

Exhibit 1.1

Execution Version

BERKELEY LIGHTS, INC.

[•] Shares of Common Stock

Underwriting Agreement

July [•], 2020

J.P. Morgan Securities LLC

Morgan Stanley & Co. LLC

Cowen and Company, LLC

As Representatives of the

several Underwriters listed

in Schedule 1 hereto

c/o J.P. Morgan Securities LLC

383 Madison Avenue

New York, New York 10179

c/o Morgan Stanley & Co. LLC

1585 Broadway

New York, New York 10036

c/o Cowen and Company, LLC

599 Lexington Avenue

New York, New York 10022

Ladies and Gentlemen:

Berkeley Lights, Inc., a Delaware corporation (the “Company”), proposes to issue and sell to the several underwriters listed in Schedule 1 hereto (the “Underwriters”), for whom you are acting as representatives (the “Representatives”), an aggregate of [•] shares of common stock, par value $0.0005 per share (“Common Stock”), of the Company (the “Underwritten Shares”) and, at the option of the Underwriters, up to an additional [•] shares of Common Stock of the Company (the “Option Shares”). The Underwritten Shares and the Option Shares are herein referred to as the “Shares”. The shares of Common Stock to be outstanding after giving effect to the sale of the Shares are referred to herein as the “Stock”.

The Company hereby confirms its agreement with the several Underwriters concerning the purchase and sale of the Shares, as follows:

1. Registration Statement. The Company has prepared and filed with the Securities and Exchange Commission (the “Commission”) under the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Securities Act”), a registration statement (File No. 333-239487), including a prospectus, relating to the Shares. Such registration statement, as


amended at the time it became effective, including the information, if any, deemed pursuant to Rule 430A, 430B or 430C under the Securities Act to be part of the registration statement at the time of its effectiveness (“Rule 430 Information”), is referred to herein as the “Registration Statement”; and as used herein, the term “Preliminary Prospectus” means each prospectus included in such registration statement (and any amendments thereto) before effectiveness, any prospectus filed with the Commission pursuant to Rule 424(a) under the Securities Act and the prospectus included in the Registration Statement at the time of its effectiveness that omits Rule 430 Information, and the term “Prospectus” means the prospectus in the form first used (or made available upon request of purchasers pursuant to Rule 173 under the Securities Act) in connection with confirmation of sales of the Shares. If the Company has filed an abbreviated registration statement pursuant to Rule 462(b) under the Securities Act (the “Rule 462 Registration Statement”), then any reference herein to the term “Registration Statement” shall be deemed to include such Rule 462 Registration Statement.

At or prior to the Applicable Time (as defined below), the Company had prepared the following information (collectively with the pricing information set forth on Annex A, the “Pricing Disclosure Package”): a Preliminary Prospectus dated July [•], 2020 and each “free-writing prospectus” (as defined pursuant to Rule 405 under the Securities Act) listed on Annex A hereto.

“Applicable Time” means [•] P.M., New York City time, on July [•], 2020.

2. Purchase of the Shares.

(a) The Company agrees to issue and sell the Underwritten Shares to the several Underwriters as provided in this underwriting agreement (this “Agreement”), and each Underwriter, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, agrees, severally and not jointly, to purchase at a price per share of $[•] (the “Purchase Price”) from the Company the respective number of Underwritten Shares set forth opposite such Underwriter’s name in Schedule 1 hereto.

In addition, the Company agrees to issue and sell the Option Shares to the several Underwriters as provided in this Agreement, and the Underwriters, on the basis of the representations, warranties and agreements set forth herein and subject to the conditions set forth herein, shall have the option to purchase, severally and not jointly, from the Company the Option Shares at the Purchase Price less an amount per share equal to any dividends or distributions declared by the Company and payable on the Underwritten Shares but not payable on the Option Shares.

If any Option Shares are to be purchased, the number of Option Shares to be purchased by each Underwriter shall be the number of Option Shares which bears the same ratio to the aggregate number of Option Shares being purchased as the number of Underwritten Shares set forth opposite the name of such Underwriter in Schedule 1 hereto (or such number increased as set forth in Section 10 hereof) bears to the aggregate number of Underwritten Shares being purchased from the Company by the several Underwriters, subject, however, to such adjustments to eliminate any fractional Shares as the Representatives in their sole discretion shall make.

 

2


The Underwriters may exercise the option to purchase Option Shares at any time in whole, or from time to time in part, on or before the thirtieth day following the date of the Prospectus, by written notice from the Representatives to the Company. Such notice shall set forth the aggregate number of Option Shares as to which the option is being exercised and the date and time when the Option Shares are to be delivered and paid for, which may be the same date and time as the Closing Date (as hereinafter defined) but shall not be earlier than the Closing Date nor later than the tenth full business day (as hereinafter defined) after the date of such notice (unless such time and date are postponed in accordance with the provisions of Section 10 hereof). Any such notice shall be given at least two business days prior to the date and time of delivery specified therein.

(b) The Company understands that the Underwriters intend to make a public offering of the Shares, and initially to offer the Shares on the terms set forth in the Pricing Disclosure Package. The Company acknowledges and agrees that the Underwriters may offer and sell Shares to or through any affiliate of an Underwriter.

(c) Payment for the Shares shall be made by wire transfer in immediately available funds to the account specified by the Company to the Representatives in the case of the Underwritten Shares, at the offices of Davis Polk & Wardwell LLP, 1600 El Camino Real, Menlo Park, California 94025 at [10:00] A.M. New York City time on July [•], 2020, or at such other time or place on the same or such other date, not later than the fifth business day thereafter, as the Representatives and the Company may agree upon in writing or, in the case of the Option Shares, on the date and at the time and place specified by the Representatives in the written notice of the Underwriters’ election to purchase such Option Shares. The time and date of such payment for the Underwritten Shares is referred to herein as the “Closing Date”, and the time and date for such payment for the Option Shares, if other than the Closing Date, is herein referred to as the “Additional Closing Date”.

Payment for the Shares to be purchased on the Closing Date or the Additional Closing Date, as the case may be, shall be made against delivery to the Representatives for the respective accounts of the several Underwriters of the Shares to be purchased on such date or the Additional Closing Date, as the case may be, with any transfer taxes payable in connection with the sale of such Shares duly paid by the Company. Delivery of the Shares shall be made through the facilities of The Depository Trust Company (“DTC”) unless the Representatives shall otherwise instruct.

(d) The Company acknowledges and agrees that the Representatives and the other Underwriters are acting solely in the capacity of an arm’s length contractual counterparty to the Company with respect to the offering of Shares contemplated hereby (including in connection with determining the terms of the offering) and not as a financial advisor or a fiduciary to, or an agent of, the Company or any other person. Additionally, neither the Representatives nor any other Underwriter is advising the Company or any other person as to any legal, tax, investment, accounting or regulatory matters in any jurisdiction. The Company shall consult with its own advisors concerning such matters and shall be responsible for making its own independent investigation and appraisal of the transactions contemplated hereby, and neither the Representatives nor the other Underwriters shall have any responsibility or liability to the Company with respect thereto. Any review by the Representatives and the other Underwriters of the Company, the transactions contemplated hereby or other matters relating to such transactions will be performed solely for the benefit of the Underwriters and shall not be on behalf of the Company.

 

3


3. Representations and Warranties of the Company. The Company represents and warrants to each Underwriter that:

(a) Preliminary Prospectus. No order preventing or suspending the use of any Preliminary Prospectus has been issued by the Commission, and each Preliminary Prospectus included in the Pricing Disclosure Package, at the time of filing thereof, complied in all material respects with the Securities Act, and no Preliminary Prospectus, at the time of filing thereof, contained any untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in any Preliminary Prospectus, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 7(b) hereof.

(b) Pricing Disclosure Package. The Pricing Disclosure Package as of the Applicable Time did not, and as of the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in such Pricing Disclosure Package, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 7(b) hereof. No statement of material fact included in the Prospectus has been omitted from the Pricing Disclosure Package and no statement of material fact included in the Pricing Disclosure Package that is required to be included in the Prospectus has been omitted therefrom.

(c) Issuer Free Writing Prospectus. Other than the Registration Statement, the Preliminary Prospectus and the Prospectus, the Company (including its agents and representatives, other than the Underwriters in their capacity as such) has not prepared, made, used, authorized, approved or referred to and will not prepare, make, use, authorize, approve or refer to any “written communication” (as defined in Rule 405 under the Securities Act) that constitutes an offer to sell or solicitation of an offer to buy the Shares (each such communication by the Company or its agents and representatives (other than a communication referred to in clause (i) below) an “Issuer Free Writing Prospectus”) other than (i) any document not constituting a prospectus pursuant to Section 2(a)(10)(a) of the Securities Act or Rule 134 under the Securities Act or (ii) the documents listed on Annex A hereto, each electronic road show and any other written

 

4


communications approved in writing in advance by the Representatives. Each such Issuer Free Writing Prospectus complies in all material respects with the Securities Act, has been or will be (within the time period specified in Rule 433) filed in accordance with the Securities Act (to the extent required thereby) and does not conflict with the information contained in the Registration Statement or the Pricing Disclosure Package, and, when taken together with all other Issuer Free Writing Prospectuses and the Preliminary Prospectus accompanying, or delivered prior to delivery of, such Issuer Free Writing Prospectus, did not, and as of the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in each such Issuer Free Writing Prospectus or Preliminary Prospectus in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in such Issuer Free Writing Prospectus or Preliminary Prospectus, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 7(b) hereof.

(d) Emerging Growth Company. From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication (as defined below) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “Emerging Growth Company”). “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on either Section 5(d) of, or Rule 163B under, the Securities Act.

(e) Testing-the-Waters Materials. The Company (i) has not alone engaged in any Testing-the-Waters Communications other than Testing-the-Waters Communications with the consent of the Representatives (x) with entities that are qualified institutional buyers (“QIBs”) within the meaning of Rule 144A under the Securities Act or institutions that are accredited investors within the meaning of Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act (“IAIs”) and otherwise in compliance with the requirements of Section 5(d) of the Securities Act or (y) with entities that the Company reasonably believed to be QIBs or IAIs and otherwise in compliance with the requirements of Rule 163B under the Securities Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications. The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications by virtue of a writing substantially in the form of Exhibit A hereto. The Company has not distributed or approved for distribution any Written Testing-the-Waters Communications other than those listed on Annex B hereto. “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405

 

5


under the Securities Act. Any individual Testing-the-Waters Communication does not conflict with the information contained in the Registration Statement or the Pricing Disclosure Package, complied in all material respects with the Securities Act, and when taken together with the Pricing Disclosure Package as of the Applicable Time, did not, and as of the Closing Date and as of the Additional Closing Date, as the case may be, will not, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(f) Registration Statement and Prospectus. The Registration Statement has been declared effective by the Commission. No order suspending the effectiveness of the Registration Statement has been issued by the Commission, and no proceeding for that purpose or pursuant to Section 8A of the Securities Act against the Company or related to the offering of the Shares has been initiated or, to the knowledge of the Company, threatened by the Commission; as of the applicable effective date of the Registration Statement and any post-effective amendment thereto, the Registration Statement and any such post-effective amendment complied and will comply in all material respects with the applicable requirements of the Securities Act, and did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading; and as of the date of the Prospectus and any amendment or supplement thereto and as of the Closing Date and as of the Additional Closing Date, as the case may be, the Prospectus will comply in all material respects with the Securities Act and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty with respect to any statements or omissions made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement and the Prospectus and any amendment or supplement thereto, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 7(b) hereof.

(g) Financial Statements. The financial statements (including the related notes thereto) of the Company and its consolidated subsidiaries included in the Registration Statement, the Pricing Disclosure Package and the Prospectus comply in all material respects with the applicable requirements of the Securities Act and present fairly in all material respects, the financial position of the Company and its consolidated subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) in the United States applied on a consistent basis throughout the periods covered thereby, except in the case of unaudited interim financial statements, which are subject to normal year-end adjustments and do not contain certain footnotes as permitted by the applicable rules of the Commission, and any supporting schedules included in the Registration Statement

 

6


present fairly in all material respects the information required to be stated therein; the other financial information included in the Registration Statement, the Pricing Disclosure Package and the Prospectus has been derived from the accounting records of the Company and its consolidated subsidiaries and presents fairly the information shown thereby; all disclosures included in the Registration Statement, the Pricing Disclosure Package and the Prospectus regarding “non-GAAP financial measures” (as such term is defined by the rules and regulations of Commission) comply in all material respects with Regulation G of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Exchange Act”) and Item 10 of Regulation S-K of the Securities Act, to the extent applicable.

(h) No Material Adverse Change. Except in each case as otherwise disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, since the date of the most recent financial statements of the Company included in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (i) there has not been any change in the capital stock (other than the issuance of shares of Common Stock upon exercise of stock options and warrants described as outstanding in, and the grant of options and awards under existing equity incentive plans described in, the Registration Statement, the Pricing Disclosure Package and the Prospectus), short-term debt or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of capital stock, or any material adverse change, or any development that would reasonably be expected to result in a material adverse change, in or affecting the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the Company and its subsidiaries taken as a whole; (ii) neither the Company nor any of its subsidiaries has entered into any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole; and (iii) neither the Company nor any of its subsidiaries has sustained any loss or interference with its business that is material to the Company and its subsidiaries taken as a whole and that is either from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority.

(i) Organization and Good Standing. The Company and each of its subsidiaries have been duly organized and are validly existing and in good standing under the laws of their respective jurisdictions of organization, are duly qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the business, properties, management, financial position, stockholders’ equity, results of operations or prospects of the

 

7


Company and its subsidiaries taken as a whole or on the performance by the Company of its obligations under this Agreement (a “Material Adverse Effect”). The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21 to the Registration Statement. The Company does not have any significant subsidiaries (as defined below).

(j) Capitalization. The Company has an authorized capitalization as set forth in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the heading “Capitalization”; all the outstanding shares of capital stock of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and are not subject to any pre-emptive or similar rights that have not been duly waived or satisfied; except as described in or expressly contemplated by the Registration Statement, the Pricing Disclosure Package and the Prospectus, there are no outstanding rights (including, without limitation, pre-emptive rights that have not been duly waived or satisfied), warrants or options to acquire, or instruments convertible into or exchangeable for, any shares of capital stock or other equity interest in the Company or any of its subsidiaries, or any contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance of any capital stock of the Company or any such subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options; the capital stock of the Company conforms in all material respects to the description thereof contained in the Registration Statement, the Pricing Disclosure Package and the Prospectus; and all the outstanding shares of capital stock or other equity interests of each subsidiary owned, directly or indirectly, by the Company have been duly and validly authorized and issued, are fully paid and non-assessable and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party.

(k) Stock Options. With respect to the stock options (the “Stock Options”) granted pursuant to the equity incentive or other stock-based compensation plans of the Company and its subsidiaries (collectively, the “Company Equity Plans”), (i) each Stock Option intended to qualify as an “incentive stock option” under Section 422 of the Code so qualifies, (ii) each grant of a Stock Option was duly authorized no later than the date on which the grant of such Stock Option was by its terms to be effective (the “Grant Date”) by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto, (iii) each such grant was made in accordance with the terms of the Company Equity Plans, any applicable provisions of the Exchange Act and all other applicable laws and regulatory rules or requirements, including the applicable rules of the Nasdaq Global [Select] Market (the “Nasdaq Market”), and (iv) each such grant was properly accounted for in accordance with GAAP in the financial statements (including the related notes) of the Company. The Company has not knowingly granted, and there is no and has been no policy or practice of the Company of granting, Stock Options prior to, or otherwise coordinating the grant of Stock Options with, the release or other public announcement of material information regarding the Company or its subsidiaries or their results of operations or prospects.

 

8


(l) Due Authorization. The Company has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder; and all action required to be taken for the due and proper authorization, execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby has been duly and validly taken.

(m) Underwriting Agreement. This Agreement has been duly authorized, executed and delivered by the Company.

(n) The Shares. The Shares to be issued and sold by the Company hereunder have been duly authorized by the Company and, when issued and delivered and paid for as provided herein, will be duly and validly issued, will be fully paid and nonassessable and will conform to the descriptions thereof in the Registration Statement, the Pricing Disclosure Package and the Prospectus; and the issuance of the Shares is not subject to any preemptive or similar rights.

(o) Reserved.

(p) No Violation or Default. Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any property or asset of the Company or any of its subsidiaries is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.

(q) No Conflicts. The execution, delivery and performance by the Company of this Agreement, the issuance and sale of the Shares and the consummation by the Company of the transactions contemplated by this Agreement or the Pricing Disclosure Package and the Prospectus will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, result in the termination, modification or acceleration of, or result in the creation or imposition of any lien, charge or encumbrance upon any property, right or asset of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any property, right or asset of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws or similar organizational documents of the Company or any of its subsidiaries or (iii) result in the violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation, default, lien, charge or encumbrance that would not, individually or in the aggregate, have a Material Adverse Effect.

 

9


(r) No Consents Required. No consent, approval, authorization, order, registration or qualification of or with any court or arbitrator or governmental or regulatory authority is required for the execution, delivery and performance by the Company of this Agreement, the issuance and sale of the Shares and the consummation by the Company of the transactions contemplated by this Agreement, except for the registration of the Shares under the Securities Act and such consents, approvals, authorizations, orders and registrations or qualifications as may be required by the Financial Industry Regulatory Authority, Inc. (“FINRA”), the Nasdaq Market and under applicable state securities laws in connection with the purchase and distribution of the Shares by the Underwriters.

(s) Legal Proceedings. There are no legal, governmental or regulatory investigations, actions, demands, claims, suits, arbitrations, inquiries or proceedings (“Actions”) pending to which the Company or any of its subsidiaries is or, may reasonably be expected to become a party or to which any property of the Company or any of its subsidiaries is or may be the subject that, individually or in the aggregate, if determined adversely to the Company or any of its subsidiaries, would reasonably be expected to have a Material Adverse Effect; to the knowledge of the Company, no such Actions are threatened or contemplated by any governmental or regulatory authority or, except as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, threatened by others; and (i) there are no current or pending Actions that are required under the Securities Act to be described in the Registration Statement, the Pricing Disclosure Package or the Prospectus that are not so described in the Registration Statement, the Pricing Disclosure Package and the Prospectus and (ii) there are no statutes, regulations or contracts or other documents that are required under the Securities Act to be filed as exhibits to the Registration Statement or described in the Registration Statement, the Pricing Disclosure Package or the Prospectus that are not so filed as exhibits to the Registration Statement or described in the Registration Statement, the Pricing Disclosure Package and the Prospectus.

(t) Independent Accountants. KPMG LLP, who have certified certain financial statements of the Company and its subsidiaries, is an independent registered public accounting firm with respect to the Company and its subsidiaries within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.

(u) Title to Real and Personal Property. The Company and its subsidiaries have good and marketable title in fee simple (in the case of real property) to, or have valid rights to lease or otherwise use, all items of real and personal property that are material to the respective businesses of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except those that (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) could not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.

 

10


(v) Intellectual Property. (i) The Company and its subsidiaries own, possess or have the right to use all patents, trademarks, service marks, trade names, domain names and other source indicators, copyrights and copyrightable works, know-how (including trade secrets, data and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), software, proprietary or confidential information and all other worldwide intellectual property and proprietary rights (including all registrations, and applications for registration of, and all goodwill associated with, the foregoing) (collectively, “Intellectual Property”) used in, or, to the knowledge of the Company, necessary for, the conduct of their respective businesses as currently conducted and as proposed to be conducted in the Registration Statement, the Pricing Disclosure Package and the Prospectus; (ii) to the knowledge of the Company, the Company’s and its subsidiaries’ conduct of their respective businesses as currently conducted has not infringed, misappropriated or otherwise violated any valid Intellectual Property of any person; (iii) other than in connection with proceedings with the relevant patent, trademark, or similar intellectual property offices in relevant jurisdictions (including the United States Patent and Trademark Office) in the ordinary course of prosecuting, maintaining, obtaining, or registering patent rights, trademark rights, copyrights, or other Intellectual Property of the Company or its Subsidiaries, there is no claim, action, suit, investigation or proceeding pending against, or to the knowledge of the Company, threatened against, the Company or its subsidiaries (A) based upon, or challenging or seeking to deny or restrict, any rights of the Company and its subsidiaries in any Intellectual Property owned by or exclusively licensed by the Company or any of its subsidiaries, (B) challenging the ownership, validity, enforceability or scope of any Intellectual Property owned or exclusively licensed by the Company or its subsidiaries, or (C) alleging that the Company or any of its subsidiaries have infringed, misappropriated or otherwise violated any Intellectual Property of any person; (iv) to the knowledge of the Company, the Intellectual Property owned or exclusively licensed by the Company and its subsidiaries has not been infringed, misappropriated or otherwise violated by any person; (v) to the knowledge of the Company, none of the Intellectual Property owned or exclusively licensed by the Company and its subsidiaries has been adjudged invalid or unenforceable and all such Intellectual Property is valid and enforceable; and (vi) the Company and its subsidiaries have taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of all Intellectual Property of the Company and its subsidiaries the value of which to the Company and its subsidiaries is contingent upon maintaining the confidentiality thereof, and, to the knowledge of the Company, no such Intellectual Property has been disclosed other than to employees, representatives, partners, legal or financial advisors and agents of the Company, or other third parties, all of whom are bound by written or other professional or ethical obligations of confidentiality with respect thereto.

 

11


(w) No Undisclosed Relationships. No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries, on the one hand, and the directors, officers, stockholders, customers, suppliers or other affiliates of the Company or any of its subsidiaries, on the other, that is required by the Securities Act to be described in each of the Registration Statement and the Prospectus and that is not so described in such documents and in the Pricing Disclosure Package.

(x) Investment Company Act. The Company is not and, after giving effect to the offering and sale of the Shares and the application of the proceeds thereof as described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, will not be required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “Investment Company Act”).

(y) Taxes. The Company and its subsidiaries have filed all federal, state, local and foreign tax returns required to be filed, and have paid all federal, state, local and foreign taxes required to be paid through the date hereof, except in each case, as would not reasonably be expected to result in a Material Adverse Effect; and there is no tax deficiency that has been, or would reasonably be expected to be, asserted against the Company or any of its subsidiaries or any of their respective properties or assets. The charges, accruals and reserves on the books of the Company in respect of any income and corporation tax liability for any years not finally determined are, in conformity with GAAP, adequate to meet any assessments or re-assessments for additional income tax for any years not finally determined, except to the extent of any inadequacies that would not reasonably be expected to result in a Material Adverse Effect.

(z) Licenses and Permits. The Company and its subsidiaries possess all licenses, sub-licenses, certificates, permits, accreditations, clearances, exemptions, approvals and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus, except where the failure to possess, file, or declare that would not individually or in the aggregate have a Material Adverse Effect; and neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such license, sub-license, certificate, permit, clearance or authorization or has any reason to believe that any such license, sub-license, certificate, permit or authorization will not be renewed in the ordinary course, except for such revocations, modifications or non-renewals, that would not, whether individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as would not reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries are, and at all times have been, in material compliance with all statutes, rules and regulations applicable to the ownership, testing, development, manufacture, packaging, processing, use, distribution, storage, import, export or disposal of any product manufactured or distributed by the Company or its subsidiaries.

 

12


(aa) No Labor Disputes. No labor disturbance by or dispute with employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened, and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of its or its subsidiaries’ principal suppliers, contractors or customers, except as would not have a Material Adverse Effect. Neither the Company nor any of its subsidiaries is a party to any collective bargaining agreement.

(bb) Certain Environmental Matters. (i) The Company and its subsidiaries (x) are in compliance with all, and have not violated any, applicable federal, state, local and foreign laws (including common law), rules, regulations, requirements, decisions, judgments, decrees, orders and other legally enforceable requirements relating to pollution or the protection of human health or safety, the environment, natural resources, hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “Environmental Laws”); (y) have received and are in compliance with all, and have not violated any, permits, licenses, certificates or other authorizations or approvals required of them under any Environmental Laws to conduct their respective businesses; and (z) have not received notice of any actual or potential liability or obligation under or relating to, or any actual or potential violation of, any Environmental Laws, including for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice; (ii) there are no costs or liabilities associated with Environmental Laws of or relating to the Company or its subsidiaries, except in the case of each of (i) and (ii) above, for any such matter as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (iii) (x) there is no proceeding that is pending, or that is known by the Company to be contemplated, against the Company or any of its subsidiaries under any Environmental Laws in which a governmental entity is also a party, other than such proceeding regarding which the Company reasonably believes no monetary sanctions of $100,000 or more will be imposed, (y) the Company and its subsidiaries are not aware of any facts or issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that would reasonably be expected to have a Material Adverse Effect, and (z) none of the Company or its subsidiaries anticipates material capital expenditures relating to any Environmental Laws.

(cc) Hazardous Materials. There has been no storage, generation, transportation, use, handling, treatment, Release or threat of Release of Hazardous Materials by, relating to or caused by the Company or the Company’s subsidiaries (or, to the knowledge of the Company, any other entity (including any predecessor) for whose acts or omissions the Company or any of the Company’s subsidiaries is or would reasonably be expected to be liable) at, on, under or from any property or facility now or previously owned, operated or leased by the Company or the Company’s subsidiaries, or to the knowledge of the Company, at, on, under or from any other property or facility, in material violation by the Company or its subsidiaries of any Environmental Laws or in a

 

13


manner or amount or to a location that would reasonably be expected to result in any material liability to the Company or its subsidiaries under any Environmental Law. “Hazardous Materials” means any material, chemical, substance, waste, pollutant, contaminant, compound, mixture, or constituent thereof, in any form or amount, including petroleum (including crude oil or any fraction thereof) and petroleum products, natural gas liquids, asbestos and asbestos-containing materials, naturally occurring radioactive materials, brine, and drilling mud, regulated or which can give rise to liability under any Environmental Law. “Release” means any spilling, leaking, seepage, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, disposing, depositing, dispersing, or migrating in, into or through the environment, or in, into, from or through any building or structure.

(dd) Compliance with ERISA. (i) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), for which the Company or any member of its “Controlled Group” (defined as any entity, whether or not incorporated, that is under common control with the Company within the meaning of Section 4001(a)(14) of ERISA or any entity that would be regarded as a single employer with the Company under Section 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended (the “Code”)) would have any liability (each, a “Plan”) has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan, excluding transactions effected pursuant to a statutory or administrative exemption; (iii) for each Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no Plan has failed (whether or not waived), or is reasonably expected to fail, to satisfy the minimum funding standards (within the meaning of Section 302 of ERISA or Section 412 of the Code) applicable to such Plan; (iv) no Plan is, or is reasonably expected to be, in “at risk status” (within the meaning of Section 303(i) of ERISA) and no Plan that is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA is in “endangered status” or “critical status” (within the meaning of Sections 304 and 305 of ERISA) (v) the fair market value of the assets of each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (vi) no “reportable event” (within the meaning of Section 4043(c) of ERISA and the regulations promulgated thereunder) has occurred or is reasonably expected to occur; (vii) each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification; (viii) neither the Company nor any member of the Controlled Group has incurred, nor reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guarantee Corporation, in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA); and (ix) none of the following events has occurred or is reasonably likely to occur: (A) a material increase in the aggregate amount of contributions required to be made to all Plans by the Company

 

14


or its Controlled Group affiliates in the current fiscal year of the Company and its Controlled Group affiliates compared to the amount of such contributions made in the Company’s and its Controlled Group affiliates’ most recently completed fiscal year; or (B) a material increase in the Company and its subsidiaries’ “accumulated post-retirement benefit obligations” (within the meaning of Accounting Standards Codification Topic 715-60) compared to the amount of such obligations in the Company and its subsidiaries’ most recently completed fiscal year, except in each case with respect to the events or conditions set forth in (i) through (ix) hereof, as would not, individually or in the aggregate, have a Material Adverse Effect.

(ee) Disclosure Controls. The Company, on a consolidated basis, maintains a system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that comply with the applicable requirements of the Exchange Act and that has been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure.

(ff) Accounting Controls. The Company, on a consolidated basis, maintains a system of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that comply with the applicable requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company, on a consolidated basis, maintains internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for material assets, individually or in the aggregate, is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. There are no material weaknesses in the Company’s internal controls. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (x) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (y) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.

 

15


(gg) Insurance. The Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as the Company reasonably believes are adequate to protect the Company and its subsidiaries and their respective businesses; and neither the Company nor any of its subsidiaries has (i) received notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.

(hh) Cybersecurity; Data Protection. Except as would not reasonably be expected to have a Material Adverse Effect, the information technology assets and equipment, computers, systems, networks, hardware, software, websites, applications, and databases owned or used by the Company or its subsidiaries (collectively, “IT Systems”) are adequate for, and operate and perform as required in connection with the operation of the business of the Company and its subsidiaries as currently conducted and as proposed to be conducted in the Registration Statement, the Pricing Disclosure Package and the Prospectus, free and clear of all bugs, errors, defects, Trojan horses, time bombs, malware and other corruptants. The Company and its subsidiaries have implemented and maintained commercially reasonable controls, policies, procedures, and safeguards to maintain and protect their material confidential information and the integrity, continuous operation, redundancy and security of all IT Systems and data collected, used or processed in connection with their respective businesses (including all personal, personally identifiable, household, sensitive, confidential or regulated data collected, used or processed in connection with their respective businesses (including protected health information) (“Personal Data”)), and, to the knowledge of the Company, there have been no breaches, violations, outages or unauthorized uses of or accesses to same, except for those that have been remedied without material cost or liability or the duty to notify any other person or entity, nor any incidents under internal review or investigations relating to the same.

(ii) Privacy. Except as would not reasonably be expected to have a Material Adverse Effect, (i) the Company and its subsidiaries have complied with and are presently in compliance with all applicable laws or statutes (including without limitation, to the extent applicable, the Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, the California Consumer Privacy Act and the European Union General Data Protection Regulation (“GDPR”)) and all applicable judgments, orders, rules and regulations of any court or arbitrator or governmental or regulatory authority, as well as applicable internal and external policies, and contractual obligations of the Company, and industry standards relating to the privacy and security of IT Systems and the collection, use, transfer, import, export, storage, disposal and disclosure of Personal Data and to the protection of such IT Systems and Personal Data from unauthorized use, access, misappropriation or modification

 

16


(“Data Security Obligations”); (ii) neither the Company or its subsidiaries have received any notification of or complaint regarding non-compliance with any Data Security Obligation and (iii) there is no pending, or to the knowledge of the Company, threatened, action, suit or proceeding by or before any court or governmental agency, authority or body pending or threatened alleging non-compliance with any Data Security Obligation. To the knowledge of the Company, there has been no unauthorized access to Personal Data collected, used or processed in connection with the Company’s business. The Company and its subsidiaries have made all disclosures to users or customers required by applicable laws and regulatory rules or requirements, and no such disclosures have been inaccurate or in violation of any applicable laws or regulatory rules and requirements. The Company and its subsidiaries have taken all necessary actions to prepare to comply with the GDPR (and all other applicable laws and regulations with respect to Personal Data that have been announced as of the date hereof as becoming effective within 12 months after the date hereof, and for which any non-compliance with same would be reasonably expected to have a Material Adverse Effect) as soon they take effect.

(jj) Software. Except as would not reasonably be expected to have a Material Adverse Effect, (i) the Company and its subsidiaries use and have used any and all software and other materials distributed under a “free,” “open source,” or similar licensing model (including but not limited to the MIT License, Apache License, GNU General Public License, GNU Lesser General Public License and GNU Affero General Public License) (“Open Source Software”) in compliance with all license terms applicable to such Open Source Software; (ii) neither the Company or its subsidiaries use or distribute or have used or distributed any Open Source Software in any manner that, to the knowledge of the Company, requires or has required (A) Company or its subsidiaries to permit reverse engineering of any software code or other technology owned by Company or its subsidiaries or (B) any software code or other technology owned by Company or its subsidiaries to be (1) disclosed or distributed in source code form, (2) licensed for the purpose of making derivative works or (3) redistributed at no charge; and (iii) neither the Company nor its subsidiaries has deposited, nor could be required to deposit, into escrow the source code of any of its software and no such source code has been released to any third party, or is entitled to be released to any third party, by any escrow agent, and the consummation of the transactions contemplated by this Agreement will not trigger the release of any such source code.

(kk) No Unlawful Payments. Neither the Company nor any of its subsidiaries nor any director, officer or employee of the Company or any of its subsidiaries nor, to the knowledge of the Company, any agent, affiliate or other person associated with or acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made or taken an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party

 

17


official or candidate for political office; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom or any other applicable anti-bribery or anti-corruption law; or (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit. The Company and its subsidiaries have instituted, maintain and enforce, and will continue to maintain and enforce policies and procedures designed to promote and ensure compliance with all applicable anti-bribery and anti-corruption laws. Neither the Company nor any of its subsidiaries will use, directly or indirectly, the proceeds of the offering in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any person in violation of any applicable anti-bribery or anti-corruption laws.

(ll) Compliance with Anti-Money Laundering Laws. The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or any of its subsidiaries conducts business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines issued, administered or enforced by any governmental agency (collectively, the “Anti-Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.

(mm) No Conflicts with Sanctions Laws. Neither the Company nor any of its subsidiaries, directors, officers, or employees, nor, to the knowledge of the Company, any agent, affiliate or other person associated with or acting on behalf of the Company or any of its subsidiaries is or is owned or controlled by one or more persons that are currently the subject or the target of any sanctions administered or enforced by the U.S. government, (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council (“UNSC”), the European Union, Her Majesty’s Treasury (“HMT”) or other relevant sanctions authority (collectively, “Sanctions”), nor is the Company or any of its subsidiaries, directors, officers, or employees, or, to the knowledge of the Company, any agent, affiliate or other person associated with or acting on behalf of the Company or any of its subsidiaries located, organized or resident, or owned or controlled by one or more persons that are located, organized or resident in a country or territory that is the subject or target of Sanctions, including, without limitation, Crimea, Cuba, Iran, North Korea and Syria (each, a “Sanctioned Country”); and the Company will not directly or indirectly use the proceeds

 

18


of the offering of the Shares hereunder, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person or entity (i) to fund or facilitate any activities of or business with any person that, at the time of such funding or facilitation, is the subject or target of Sanctions, (ii) to fund or facilitate any activities of or business in any Sanctioned Country or (iii) in any other manner that will result in a violation by any person (including any person participating in the transaction, whether as underwriter, advisor, investor or otherwise) of Sanctions. The Company and its subsidiaries have not knowingly engaged in and are not now knowingly engaged in any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country.

(nn) No Restrictions on Subsidiaries. No subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock or similar ownership interest, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s properties or assets to the Company or any other subsidiary of the Company.

(oo) No Broker’s Fees. Neither the Company nor any of its subsidiaries is a party to any contract, agreement or understanding with any person (other than this Agreement) that would give rise to a valid claim against any of them or any Underwriter for a brokerage commission, finder’s fee or like payment in connection with the offering and sale of the Shares.

(pp) No Registration Rights. No person has the right to require the Company or any of its subsidiaries to register any securities for sale under the Securities Act by reason of the filing of the Registration Statement with the Commission or the issuance and sale of the Shares, except for such rights as have been duly waived.

(qq) No Stabilization. Neither the Company nor any of its subsidiaries or, to the Company’s knowledge, other affiliates has taken, directly or indirectly, without giving effect to activities by the Underwriters, any action designed to or that would reasonably be expected to cause or result in any stabilization or manipulation of the price of the Shares.

(rr) Margin Rules. Neither the issuance, sale and delivery of the Shares nor the application of the proceeds thereof by the Company as described in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus will violate Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors.

(ss) Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) included in any of the Registration Statement, the Pricing Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.

 

19


(tt) Statistical and Market Data. Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects.

(uu) Sarbanes-Oxley Act. There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended and the rules and regulations promulgated in connection therewith (the “Sarbanes-Oxley Act”), including Section 402 related to loans.

(vv) Status under the Securities Act. At the time of filing the Registration Statement and any post-effective amendment thereto, at the earliest time thereafter that the Company or any offering participant made a bona fide offer (within the meaning of Rule 164(h)(2) under the Securities Act) of the Shares and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405 under the Securities Act. The Company has paid the registration fee for this offering pursuant to Rule 456(b)(1) under the Securities Act or will pay such fee within the time period required by such rule (without giving effect to the proviso therein) and in any event prior to the Closing Date.

(ww) No Ratings. There are (and prior to the Closing Date, will be) no debt securities, convertible securities or preferred stock issued or guaranteed by the Company or any of its subsidiaries that are rated by a “nationally recognized statistical rating organization”, as such term is defined in Section 3(a)(62) under the Exchange Act.

(xx) Regulatory Matters. Since December 1, 2016, the Company has operated and currently is in compliance in all material respects with applicable provisions of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. § 301 et seq.) and the regulations promulgated thereunder (the “FDCA”).

(yy) Description of Health Care Laws. The statements included in the Registration Statement, the Pricing Disclosure Package and the Prospectus under the caption: “Government regulations” are true and correct in all material respects; and there are no U.S. Food and Drug Administration (“FDA”) rules or regulations, which as of this date are material to the businesses of the Company or the Company’s subsidiaries which are not described in the Registration Statement, the Pricing Disclosure Package or the Prospectus.

 

20


(zz) Product Manufacturing. The manufacture of the Company’s products by or, to the knowledge of the Company, on behalf of the Company, to the extent applicable, is being conducted in compliance with the FDCA, including, without limitation, the FDA’s Quality System Regulation set forth at 21 CFR Part 820, and the respective counterparts thereof promulgated by governmental authorities in the United Kingdom and the European Union, except where failures to so comply, whether individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect. The Company has not had any manufacturing site (whether Company-owned or, to the knowledge of the Company, that of a third-party manufacturer for the Company’s products) subject to a governmental authority (including FDA) shutdown or import or export prohibition.

4. Further Agreements of the Company. The Company covenants and agrees with each Underwriter that:

(a) Required Filings. The Company will file the final Prospectus with the Commission within the time periods specified by Rule 424(b) and Rule 430A, 430B or 430C under the Securities Act, will file any Issuer Free Writing Prospectus to the extent required by Rule 433 under the Securities Act; and the Company will furnish copies of the Prospectus and each Issuer Free Writing Prospectus (to the extent not previously delivered) to the Underwriters in New York City prior to 10:00 A.M., New York City time, on the business day next succeeding the date of this Agreement in such quantities as the Representatives may reasonably request.

(b) Delivery of Copies. The Company will deliver, without charge, (i) to the Representatives, four signed copies of the Registration Statement as originally filed and each amendment thereto, in each case including all exhibits and consents filed therewith; and (ii) to each Underwriter (A) a conformed copy of the Registration Statement as originally filed and each amendment thereto (without exhibits) and (B) during the Prospectus Delivery Period (as defined below), as many copies of the Prospectus (including all amendments and supplements thereto and each Issuer Free Writing Prospectus) as the Representatives may reasonably request. As used herein, the term “Prospectus Delivery Period” means such period of time after the first date of the public offering of the Shares as in the opinion of counsel for the Underwriters a prospectus relating to the Shares is required by law to be delivered (or required to be delivered but for Rule 172 under the Securities Act) in connection with sales of the Shares by any Underwriter or dealer.

(c) Amendments or Supplements, Issuer Free Writing Prospectuses. Before making, preparing, using, authorizing, approving, referring to or filing any Issuer Free Writing Prospectus, and before filing any amendment or supplement to the Registration Statement, the Pricing Disclosure Package or the Prospectus, the Company will furnish to the Representatives and counsel for the Underwriters a copy of the proposed Issuer Free Writing Prospectus, amendment or supplement for review and will not make, prepare, use, authorize, approve, refer to or file any such Issuer Free Writing Prospectus or file any such proposed amendment or supplement to which the Representatives reasonably object.

 

21


(d) Notice to the Representatives. The Company will advise the Representatives promptly, and confirm such advice in writing (which may be by electronic mail), (i) when the Registration Statement has become effective; (ii) when any amendment to the Registration Statement has been filed or becomes effective; (iii) when any supplement to the Pricing Disclosure Package, the Prospectus, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication or any amendment to the Prospectus has been filed or distributed; (iv) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or the receipt of any comments from the Commission relating to the Registration Statement or any other request by the Commission for any additional information including, but not limited to, any request for information concerning any Testing-the-Waters Communication; (v) of the issuance by the Commission or any other governmental or regulatory authority of any order suspending the effectiveness of the Registration Statement or preventing or suspending the use of any Preliminary Prospectus, any of the Pricing Disclosure Package, the Prospectus or any Written Testing-the-Waters Communication or the initiation or threatening of any proceeding for that purpose or pursuant to Section 8A of the Securities Act; (vi) of the occurrence of any event or development within the Prospectus Delivery Period as a result of which the Prospectus, any of the Pricing Disclosure Package, any Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication as then amended or supplemented would include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Prospectus, the Pricing Disclosure Package, any such Issuer Free Writing Prospectus or any Written Testing-the-Waters Communication is delivered to a purchaser, not misleading; and (vii) of the receipt by the Company of any notice with respect to any suspension of the qualification of the Shares for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and the Company will use its reasonable best efforts to prevent the issuance of any such order suspending the effectiveness of the Registration Statement, preventing or suspending the use of any Preliminary Prospectus, any of the Pricing Disclosure Package or the Prospectus or any Written Testing-the-Waters Communication or suspending any such qualification of the Shares and, if any such order is issued, will obtain as soon as possible the withdrawal thereof.

(e) Ongoing Compliance. (1) If during the Prospectus Delivery Period (i) any event or development shall occur or condition shall exist as a result of which the Prospectus as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Prospectus is delivered to a purchaser, not misleading or (ii) it is necessary to amend or supplement the Prospectus to comply with law, the Company will promptly notify the Underwriters thereof and forthwith prepare and, subject to paragraph (c) above, file with the Commission and furnish to the Underwriters and to such dealers as the Representatives may designate such amendments or supplements to the Prospectus as may be necessary so that the statements in the Prospectus as so amended or supplemented will not, in the light of the

 

22


circumstances existing when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus will comply with law and (2) if at any time prior to the Closing Date (i) any event or development shall occur or condition shall exist as a result of which the Pricing Disclosure Package as then amended or supplemented would include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to a purchaser, not misleading or (ii) it is necessary to amend or supplement the Pricing Disclosure Package to comply with law, the Company will promptly notify the Underwriters thereof and forthwith prepare and, subject to paragraph (c) above, file with the Commission (to the extent required) and furnish to the Underwriters and to such dealers as the Representatives may designate such amendments or supplements to the Pricing Disclosure Package as may be necessary so that the statements in the Pricing Disclosure Package as so amended or supplemented will not, in the light of the circumstances existing when the Pricing Disclosure Package is delivered to a purchaser, be misleading or so that the Pricing Disclosure Package will comply with law.

(f) Blue Sky Compliance. The Company will qualify the Shares for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request and will continue such qualifications in effect so long as required for distribution of the Shares; provided that the Company shall not be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not otherwise so subject.

(g) Earning Statement. The Company will make generally available to its security holders and the Representatives as soon as practicable an earning statement that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the “effective date” (as defined in Rule 158) of the Registration Statement; provided that the Company will be deemed to have furnished such statements to its security holders and the Representatives to the extent they are filed on the Commission’s Electronic Data Gathering, Analysis and Retrieval system (“EDGAR”).

(h) Clear Market. For a period of 180 days after the date of the Prospectus, the Company will not (i) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, or submit to, or file with, the Commission a registration statement under the Securities Act relating to, any shares of Stock or any securities convertible into or exercisable or exchangeable for Stock, or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Stock or any such other securities, or publicly disclose the intention to undertake any of the transactions described in clause

 

23


(i) or (ii), whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Stock or such other securities, in cash or otherwise, without the prior written consent of J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, other than (A) the Shares to be sold hereunder, (B) any shares of Stock of the Company issued upon the conversion of convertible preferred stock outstanding on the date of this Agreement in connection with the transactions contemplated by this Agreement and as disclosed in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (C) any shares of capital stock of the Company issued upon the exercise of warrants described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (D) any shares of Stock of the Company issued upon the exercise, vesting or settlement of options or other awards granted under Company Equity Plans or pursuant to any employee stock purchase plan of the Company, in each case described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (E) any options, shares of Stock and other awards granted under a Company Equity Plan or employee stock purchase plan of the Company, in each case described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, (F) the filing by the Company of any registration statement on Form S-8 or a successor form thereto relating to a Company Equity Plan or employee stock purchase plan described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, and (G) the issuance of securities by the Company in connection with mergers, acquisitions or commercial or strategic transactions (including, without limitation joint ventures, marketing or distribution arrangements, collaboration agreements or intellectual property license agreements), provided that the aggregate number of shares issued pursuant to this clause (G) does not exceed 10% of the Company’s securities outstanding immediately following the issuance and sale of the Underwritten Shares pursuant hereto, issued by the Company; provided that the recipient of any such shares of Stock or securities issued pursuant to clauses (B), (C), (D), (E) and (G) during the 180-day restricted period described above shall enter into an agreement for the remainder of the Restricted Period substantially in the form of Exhibit D hereto.

If J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, in their sole discretion, agree to release or waive the restrictions set forth in a lock-up letter described in Section 6(m) hereof for an officer or director of the Company and provide the Company with notice of the impending release or waiver substantially in the form of Exhibit B hereto at least three business days before the effective date of the release or waiver, the Company agrees to announce the impending release or waiver by a press release substantially in the form of Exhibit C hereto through a major news service at least two business days before the effective date of the release or waiver.

(i) Use of Proceeds. The Company will apply the net proceeds from the sale of the Shares as described in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus under the heading “Use of proceeds”.

 

24


(j) No Stabilization. Neither the Company nor its subsidiaries or affiliates will take, directly or indirectly, without giving effect to activities by the Underwriters, any action designed to or that would reasonably be expected to cause or result in any stabilization or manipulation of the price of the Stock.

(k) Exchange Listing. The Company will use its reasonable best efforts to list for quotation the Shares on the Nasdaq Market.

(l) Reports. During a period of three years from the date of this Agreement, the Company will furnish to the Representatives, as soon as commercially reasonable after the date that they are available, copies of all reports or other communications (financial or other) furnished to holders of the Shares, and copies of any reports and financial statements furnished to or filed with the Commission or any national securities exchange or automatic quotation system; provided the Company will be deemed to have furnished such reports and financial statements to the Representatives to the extent they are filed on EDGAR.

(m) Record Retention. The Company will, pursuant to reasonable procedures developed in good faith, retain copies of each Issuer Free Writing Prospectus that is not filed with the Commission in accordance with Rule 433 under the Securities Act.

(n) Filings. The Company will file with the Commission such reports as may be required by Rule 463 under the Securities Act.

(o) Emerging Growth Company. The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (i) completion of the distribution of Shares within the meaning of the Securities Act and (ii) completion of the 180-day restricted period referred to in Section 4(h) hereof.

(p) Transfer Restrictions. The Company will not waive or amend, and will take reasonable efforts to enforce the terms of all existing agreements, plans and arrangements restricting the transfer by any holder of such holder’s shares of Common Stock or securities convertible into or exercisable or exchangeable for Common Stock (the “Securities”) following the offering of the Shares contemplated hereby. The Company will issue stop-transfer instructions to the transfer agent with respect to any transaction that would constitute a breach of, or default under, such provisions. During the Restricted Period, the Company will enforce, and not waive or amend, such stop-transfer instructions and any transfer restriction, including any “market standoff,” “holdback” or similar agreement or provision, applicable to any Securities unless the Company shall have obtained the prior written consent of J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC; provided that this Section 4(p) shall not prohibit the Company from effecting such a waiver or amendment to permit a transfer of securities which is permissible under the terms of the lock-up letters described in Section 6(m).

5. Certain Agreements of the Underwriters. Each Underwriter hereby represents and agrees that:

(a) It has not and will not use, authorize use of, refer to or participate in the planning for use of, any “free writing prospectus”, as defined in Rule 405 under the Securities Act (which term includes use of any written information furnished to the Commission by the Company and not incorporated by reference into the Registration Statement and any press release issued by the Company) other than (i) a free writing prospectus that contains no “issuer information” (as defined in Rule 433(h)(2) under the Securities Act) that was not included (including through incorporation by reference) in the Preliminary Prospectus or a previously filed Issuer Free Writing Prospectus, (ii) any Issuer Free Writing Prospectus listed on Annex A or prepared pursuant to Section 3(c) or Section 4(c) above (including any electronic road show), or (iii) any free writing prospectus prepared by such underwriter and approved by the Company in advance in writing (each such free writing prospectus referred to in clauses (i) or (iii), an “Underwriter Free Writing Prospectus”).

 

25


(b) It has not and will not, without the prior written consent of the Company, use any free writing prospectus that contains the final terms of the Shares unless such terms have previously been included in a free writing prospectus filed with the Commission; provided that Underwriters may use a term sheet substantially in the form of Annex C hereto without the consent of the Company; provided further that any Underwriter using such term sheet shall notify the Company, and provide a copy of such term sheet to the Company, prior to, or substantially concurrently with, the first use of such term sheet.

(c) It is not subject to any pending proceeding under Section 8A of the Securities Act with respect to the offering (and will promptly notify the Company if any such proceeding against it is initiated during the Prospectus Delivery Period).

6. Conditions of Underwriters’ Obligations. The obligation of each Underwriter to purchase the Underwritten Shares on the Closing Date or the Option Shares on the Additional Closing Date, as the case may be, as provided herein is subject to the performance by the Company of its covenants and other obligations hereunder and to the following additional conditions:

(a) Registration Compliance; No Stop Order. No order suspending the effectiveness of the Registration Statement shall be in effect, and no proceeding for such purpose or pursuant to Section 8A under the Securities Act shall be pending before or threatened by the Commission; the Prospectus and each Issuer Free Writing Prospectus shall have been timely filed with the Commission under the Securities Act (in the case of an Issuer Free Writing Prospectus, to the extent required by Rule 433 under the Securities Act) and in accordance with Section 4(a) hereof; and all requests by the Commission for additional information shall have been complied with to the reasonable satisfaction of the Representatives.

(b) Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct on the date hereof and on and as of the Closing Date or the Additional Closing Date, as the case may be; and the statements of the Company and its officers made in any certificates delivered pursuant to this Agreement shall be true and correct on and as of the Closing Date or the Additional Closing Date, as the case may be.

(c) No Material Adverse Change. No event or condition of a type described in Section [3(h)] hereof shall have occurred or shall exist, which event or condition is not described in the Pricing Disclosure Package (excluding any amendment or supplement thereto) and the Prospectus (excluding any amendment or supplement thereto) and the effect of which in the judgment of the Representatives makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Shares on the Closing Date or the Additional Closing Date, as the case may be, on the terms and in the manner contemplated by this Agreement, the Pricing Disclosure Package and the Prospectus.

 

26


(d) Officers’ Certificate. The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, a certificate of the chief financial officer or chief accounting officer of the Company and one additional senior executive officer of the Company who is satisfactory to the Representatives (i) confirming that such officers have carefully reviewed the Registration Statement, the Pricing Disclosure Package and the Prospectus and, to the knowledge of such officers, the representations set forth in Sections 3(b) and 3(d) hereof are true and correct, (ii) confirming that the other representations and warranties of the Company in this Agreement are true and correct and that the Company has complied with all agreements and satisfied all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date or the Additional Closing Date, as the case may be, and (iii) to the effect set forth in paragraphs (a), (b) and (c) above.

(e) Comfort Letters. On the date of this Agreement and on the Closing Date or the Additional Closing Date, as the case may be, KPMG LLP shall have furnished to the Representatives, at the request of the Company, letters, dated the respective dates of delivery thereof and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives, containing statements and information of the type customarily included in accountants’ “comfort letters” to underwriters with respect to the financial statements and certain financial information contained in each of the Registration Statement, the Pricing Disclosure Package and the Prospectus; provided, that the letter delivered on the Closing Date or the Additional Closing Date, as the case may be, shall use a “cut-off” date no more than two business days prior to such Closing Date or such Additional Closing Date, as the case may be.

(f) Certificate of Chief Financial Officer. On the date of this Agreement and on the Closing Date or the Additional Closing Date, as the case may be, the Company shall have furnished to the Representatives a certificate, dated the respective dates of delivery thereof and addressed to the Underwriters, of its chief financial officer with respect to certain financial data contained in the Pricing Disclosure Package and the Prospectus, providing “management comfort” with respect to such information, in form and substance reasonably satisfactory to the Representatives.

(g) Opinion of Intellectual Property Counsel for the Company. The Company’s Senior Director of Intellectual Property shall have furnished to the Representatives, at the request of the Company, their written opinions, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives.

(h) Opinion and 10b-5 Statement of Counsel for the Company. Latham & Watkins LLP, counsel for the Company, shall have furnished to the Representatives, at the request of the Company, their written opinion and 10b-5 statement, dated the Closing Date or the Additional Closing Date, as the case may be, and addressed to the Underwriters, in form and substance reasonably satisfactory to the Representatives.

 

27


(i) Opinion and 10b-5 Statement of Counsel for the Underwriters. The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, an opinion and 10b-5 statement, addressed to the Underwriters, of Davis Polk & Wardwell LLP, counsel for the Underwriters, with respect to such matters as the Representatives may reasonably request, and such counsel shall have received such documents and information as they may reasonably request to enable them to pass upon such matters.

(j) No Legal Impediment to Issuance and Sale. No action shall have been taken and no statute, rule, regulation or order shall have been enacted, adopted or issued by any federal, state or foreign governmental or regulatory authority that would, as of the Closing Date or the Additional Closing Date, as the case may be, prevent the issuance or sale of the Shares; and no injunction or order of any federal, state or foreign court shall have been issued that would, as of the Closing Date or the Additional Closing Date, as the case may be, prevent the issuance or sale of the Shares.

(k) Good Standing. The Representatives shall have received on and as of the Closing Date or the Additional Closing Date, as the case may be, satisfactory evidence of the good standing of the Company in its jurisdiction of organization and good standing in such other jurisdictions as the Representatives may reasonably request, in each case in writing or any standard form of telecommunication from the appropriate governmental authorities of such jurisdictions.

(l) Exchange Listing. The Shares to be delivered on the Closing Date or the Additional Closing Date, as the case may be, shall have been approved for listing on the Nasdaq Market, subject to official notice of issuance.

(m) Lock-up Agreements. The “lock-up” agreements, each substantially in the form of Exhibit D hereto, between you and certain shareholders, officers and directors of the Company relating to sales and certain other dispositions of shares of Stock or certain other securities, delivered to you on or before the date hereof, shall be full force and effect on the Closing Date or the Additional Closing Date, as the case may be.

(n) Certificate Regarding Beneficial Ownership. The Representatives shall have received, prior to the date of this Agreement, properly completed and executed Certifications Regarding Beneficial Ownership of Legal Entity Customers, together with copies of identifying documentation.

(o) Additional Documents. On or prior to the Closing Date or the Additional Closing Date, as the case may be, the Company shall have furnished to the Representatives such further certificates and documents as the Representatives may reasonably request.

All opinions, letters, certificates and evidence mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in form and substance reasonably satisfactory to counsel for the Underwriters.

 

28


7. Indemnification and Contribution.

(a) Indemnification of the Underwriters. The Company agrees to indemnify and hold harmless each Underwriter, its affiliates, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, not misleading, or (ii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (or any amendment or supplement thereto), any Preliminary Prospectus, any Issuer Free Writing Prospectus, any “issuer information” filed or required to be filed pursuant to Rule 433(d) under the Securities Act, any Testing-the-Waters Communication, any road show as defined in Rule 433(h) under the Securities Act (a “road show”) or any Pricing Disclosure Package (including any Pricing Disclosure Package that has subsequently been amended), or caused by any omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in paragraph (b) below.

(b) Indemnification of the Company. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement, the Prospectus (or any amendment or supplement thereto), any Preliminary Prospectus, any Issuer Free Writing Prospectus, any Written Testing-the-Waters Communication, any road show or any Pricing Disclosure Package (including any Pricing Disclosure Package that has subsequently been amended), it being understood and agreed upon that the only such information furnished by any Underwriter consists of the following information in the Prospectus furnished on behalf of each Underwriter: the concession figures appearing in the third paragraph under the caption “Underwriting” and the information contained in the sixteenth and seventeenth paragraphs under the caption “Underwriting” relating to price stabilization, short positions and penalty bids.

 

29


(c) Notice and Procedures. If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnification may be sought pursuant to the preceding paragraphs of this Section 7, such person (the “Indemnified Person”) shall promptly notify the person against whom such indemnification may be sought (the “Indemnifying Person”) in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under the preceding paragraphs of this Section 7 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under the preceding paragraphs of this Section 7. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person (who shall not, without the consent of the Indemnified Person, be counsel to the Indemnifying Person) to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section that the Indemnifying Person may designate in such proceeding and shall pay the reasonably incurred fees and expenses in such proceeding and shall pay the reasonably incurred fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be paid or reimbursed as they are incurred. Any such separate firm for any Underwriter, its affiliates, directors and officers and any control persons of such Underwriter shall be designated in writing by J.P. Morgan Securities LLC and any such separate firm for the Company, its directors, its officers who signed the Registration Statement and any control persons of the Company shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any

 

30


Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (x) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (y) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person.

(d) Contribution. If the indemnification provided for in paragraphs (a) or (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, on the one hand, and the Underwriters on the other, from the offering of the Shares or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company, on the one hand, and the Underwriters on the other, in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company, on the one hand, and the Underwriters on the other, shall be deemed to be in the same respective proportions as the net proceeds (before deducting expenses) received by the Company from the sale of the Shares and the total underwriting discounts and commissions received by the Underwriters in connection therewith, in each case as set forth in the table on the cover of the Prospectus, bear to the aggregate offering price of the Shares. The relative fault of the Company, on the one hand, and the Underwriters on the other, shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by the Underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

(e) Limitation on Liability. The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to paragraph (d) above were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of paragraphs (d) and (e), in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total underwriting discounts and commissions received by such Underwriter with respect to the offering of the Shares exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters’ obligations to contribute pursuant to paragraphs (d) and (e) are several in proportion to their respective purchase obligations hereunder and not joint.

 

31


(f) Non-Exclusive Remedies. The remedies provided for in this Section 7 paragraphs (a) through (e) are not exclusive and shall not limit any rights or remedies which may otherwise be available to any Indemnified Person at law or in equity.

8. Effectiveness of Agreement. This Agreement shall become effective as of the date first written above.

9. Termination. This Agreement may be terminated in the absolute discretion of the Representatives, by notice to the Company, if after the execution and delivery of this Agreement and on or prior to the Closing Date or, in the case of the Option Shares, prior to the Additional Closing Date (i) trading generally shall have been suspended or materially limited on or by any of the New York Stock Exchange or The Nasdaq Stock Market; (ii) trading of any securities issued or guaranteed by the Company shall have been suspended on any exchange or in any over-the-counter market; (iii) a general moratorium on commercial banking activities shall have been declared by federal or New York State authorities; or (iv) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis, either within or outside the United States, that, in the judgment of the Representatives, is material and adverse and makes it impracticable or inadvisable to proceed with the offering, sale or delivery of the Shares on the Closing Date or the Additional Closing Date, as the case may be, on the terms and in the manner contemplated by this Agreement, the Pricing Disclosure Package and the Prospectus.

10. Defaulting Underwriter.

(a) If, on the Closing Date or the Additional Closing Date, as the case may be, any Underwriter defaults on its obligation to purchase the Shares that it has agreed to purchase hereunder on such date, the non-defaulting Underwriters may in their discretion arrange for the purchase of such Shares by other persons satisfactory to the Company on the terms contained in this Agreement. If, within 36 hours after any such default by any Underwriter, the non-defaulting Underwriters do not arrange for the purchase of such Shares, then the Company shall be entitled to a further period of 36 hours within which to procure other persons satisfactory to the non-defaulting Underwriters to purchase such Shares on such terms. If other persons become obligated or agree to purchase the Shares of a defaulting Underwriter, either the non-defaulting Underwriters or the Company may postpone the Closing Date or the Additional Closing Date, as the case may be, for up to five full business days in order to effect any changes that in the opinion of counsel for the Company or counsel for the Underwriters may be necessary in the Registration Statement and the Prospectus or in any other document or arrangement, and the Company agrees to promptly prepare any amendment or supplement to the Registration Statement and the Prospectus that effects any such changes. As used in this Agreement, the term “Underwriter” includes, for all purposes of this Agreement unless the context otherwise requires, any person not listed in Schedule 1 hereto that, pursuant to this Section 10, purchases Shares that a defaulting Underwriter agreed but failed to purchase.

 

32


(b) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters and the Company as provided in paragraph (a) above, the aggregate number of Shares that remain unpurchased on the Closing Date or the Additional Closing Date, as the case may be, does not exceed one-eleventh of the aggregate number of Shares to be purchased on such date, then the Company shall have the right to require each non-defaulting Underwriter to purchase the number of Shares that such Underwriter agreed to purchase hereunder on such date plus such Underwriter’s pro rata share (based on the number of Shares that such Underwriter agreed to purchase on such date) of the Shares of such defaulting Underwriter or Underwriters for which such arrangements have not been made.

(c) If, after giving effect to any arrangements for the purchase of the Shares of a defaulting Underwriter or Underwriters by the non-defaulting Underwriters and the Company as provided in paragraph (a) above, the aggregate number of Shares that remain unpurchased on the Closing Date or the Additional Closing Date, as the case may be, exceeds one-eleventh of the aggregate amount of Shares to be purchased on such date, or if the Company shall not exercise the right described in paragraph (b) above, then this Agreement or, with respect to any Additional Closing Date, the obligation of the Underwriters to purchase Shares on the Additional Closing Date, as the case may be, shall terminate without liability on the part of the non-defaulting Underwriters. Any termination of this Agreement pursuant to this Section 10 shall be without liability on the part of the Company, except that the Company will continue to be liable for the payment of expenses as set forth in Section 11 hereof and except that the provisions of Section 7 hereof shall not terminate and shall remain in effect.

(d) Nothing contained herein shall relieve a defaulting Underwriter of any liability it may have to the Company or any non-defaulting Underwriter for damages caused by its default.

11. Payment of Expenses.

(a) Whether or not the transactions contemplated by this Agreement are consummated or this Agreement is terminated, the Company will pay or cause to be paid all costs and expenses incident to the performance of its obligations hereunder, including without limitation, (i) the costs incident to the authorization, issuance, sale, preparation and delivery of the Shares and any taxes payable in that connection; (ii) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement, the Preliminary Prospectus, any Issuer Free Writing Prospectus, any Pricing Disclosure Package and the Prospectus (including all exhibits, amendments and supplements thereto) and the distribution thereof; (iii) the fees and expenses of the Company’s counsel and independent accountants; (iv) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Shares under the laws of such jurisdictions as the Representatives may designate and the preparation, printing and distribution of a Blue Sky Memorandum (including the related fees and expenses of counsel for the Underwriters); (v) the cost of preparing stock certificates; (vi) the costs and charges of any transfer agent and any registrar; (vii) all expenses and application fees incurred in connection with any filing with, and clearance of the offering by, FINRA, provided that the aggregate amount payable by the Company pursuant to clauses (iv) and (vii) shall not exceed $40,000 (excluding filing fees); (viii) all expenses incurred by the Company

 

33


in connection with any “road show” presentation to potential investors (provided, however, that the Underwriters and the Company shall each pay 50% of the cost of chartering any aircraft to be used in connection with the road show by the Company and the Underwriters); and (x) all expenses and application fees related to the listing of the Shares on the Nasdaq Global [Select] Market.

(b) If (i) this Agreement is terminated pursuant to clauses (i) or (ii) of Section 9, (ii) the Company for any reason fails to tender the Shares for delivery to the Underwriters or (iii) the Underwriters decline to purchase the Shares for any reason permitted under this Agreement, the Company agrees to reimburse the Underwriters for all out-of-pocket costs and expenses (including the fees and expenses of their counsel) reasonably incurred by the Underwriters in connection with this Agreement and the offering contemplated hereby. For the avoidance of doubt, it is understood that the Company shall not pay or reimburse any costs, fees or expenses incurred by any Underwriter that defaults on its obligations to purchase the Shares.

12. Persons Entitled to Benefit of Agreement. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and any controlling persons referred to herein, and the affiliates of each Underwriter referred to in Section 7 hereof. Nothing in this Agreement is intended or shall be construed to give any other person any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein. No purchaser of Shares from any Underwriter shall be deemed to be a successor merely by reason of such purchase.

13. Survival. The respective indemnities, rights of contribution, representations, warranties and agreements of the Company and the Underwriters contained in this Agreement or made by or on behalf of the Company or the Underwriters pursuant to this Agreement or any certificate delivered pursuant hereto shall survive the delivery of and payment for the Shares and shall remain in full force and effect, regardless of any termination of this Agreement or any investigation made by or on behalf of the Company or the Underwriters or the directors, officers, controlling persons or affiliates referred to in Section 7 hereof.

14. Certain Defined Terms. For purposes of this Agreement, (a) except where otherwise expressly provided, the term “affiliate” has the meaning set forth in Rule 405 under the Securities Act; (b) the term “business day” means any day other than a day on which banks are permitted or required to be closed in New York City; (c) the term “subsidiary” has the meaning set forth in Rule 405 under the Securities Act; and (d) the term “significant subsidiary” has the meaning set forth in Rule 1-02 of Regulation S-X under the Exchange Act.

 

34


15. Compliance with USA Patriot Act. In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Underwriters are required to obtain, verify and record information that identifies their respective clients, including the Company, which information may include the name and address of their respective clients, as well as other information that will allow the Underwriters to properly identify their respective clients.

16. Miscellaneous.

(a) Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted and confirmed by any standard form of telecommunication. Notices to the Underwriters shall be given to the Representatives c/o J.P. Morgan Securities LLC, 383 Madison Avenue, New York, New York 10179 (fax: (212) 622-8358); Attention: Equity Syndicate Desk; c/o Morgan Stanley & Co. LLC, 1585 Broadway, New York, New York 10036, Attention: Equity Syndicate Desk, with a copy to the Legal Department; and c/o Cowen and Company, LLC, 599 Lexington Avenue, New York, New York 10022, Attention: Head of Equity Capital Markets (fax: 646-562-1249), with a copy to the General Counsel (fax: 646-562-1130). Notices to the Company shall be given to it at Berkeley Lights, Inc. 5858 Horton Street, Suite 320, Emeryville, CA 94608, Attention: Chief Financial Officer and General Counsel, and a copy (which shall not constitute notice) to Latham & Watkins LLP, 140 Scott Drive, Menlo Park, California 94025, Attention: Brian Cuneo.

(b) Governing Law. This Agreement and any claim, controversy or dispute arising under or related to this Agreement shall be governed by and construed in accordance with the laws of the State of New York.

(c) Submission to Jurisdiction. The Company hereby submits to the exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company waives any objection which it may now or hereafter have to the laying of venue of any such suit or proceeding in such courts. The Company agrees that final judgment in any such suit, action or proceeding brought in such court shall be conclusive and binding upon the Company and may be enforced in any court to the jurisdiction of which Company is subject by a suit upon such judgment.

(d) Waiver of Jury Trial. Each of the parties hereto hereby waives any right to trial by jury in any suit or proceeding arising out of or relating to this Agreement.

(e) Recognition of the U.S. Special Resolution Regimes.

(i) In the event that any Underwriter that is a Covered Entity becomes subject to a proceeding under a U.S. Special Resolution Regime, the transfer from such Underwriter of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.

 

35


(ii) In the event that any Underwriter that is a Covered Entity or a BHC Act Affiliate of such Underwriter becomes subject to a proceeding under a U.S. Special Resolution Regime, Default Rights under this Agreement that may be exercised against such Underwriter are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.

As used in this Section 16[(e)]:

“BHC Act Affiliate” has the meaning assigned to the term “affiliate” in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).

“Covered Entity” means any of the following:

(i) a “covered entity” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 252.82(b);

(ii) a “covered bank” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 47.3(b); or

(iii) a “covered FSI” as that term is defined in, and interpreted in accordance with, 12 C.F.R. § 382.2(b).

“Default Right” has the meaning assigned to that term in, and shall be interpreted in accordance with, 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.

“U.S. Special Resolution Regime” means each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.

(f) Counterparts. This Agreement may be signed in counterparts (which may include counterparts delivered by any standard form of telecommunication), each of which shall be an original and all of which together shall constitute one and the same instrument.

(g) Amendments or Waivers. No amendment or waiver of any provision of this Agreement, nor any consent or approval to any departure therefrom, shall in any event be effective unless the same shall be in writing and signed by the parties hereto.

(h) Headings. The headings herein are included for convenience of reference only and are not intended to be part of, or to affect the meaning or interpretation of, this Agreement.

 

36


If the foregoing is in accordance with your understanding, please indicate your acceptance of this Agreement by signing in the space provided below.

 

Very truly yours,
BERKELEY LIGHTS, INC.
By:  

     

  Name:
  Title:

 

Accepted: As of the date first written above
J.P. MORGAN SECURITIES LLC
MORGAN STANLEY & CO. LLC
COWEN AND COMPANY, LLC
Each for itself and on behalf of the several Underwriters listed in Schedule 1 hereto.
J.P. MORGAN SECURITIES LLC
By:  

     

  Authorized Signatory
  Name:
  Title:
MORGAN STANLEY & CO. LLC
By:  

     

  Authorized Signatory
  Name:
  Title:
COWEN AND COMPANY, LLC
By:  

     

  Authorized Signatory
  Name:
  Title:

[Signature Page to Underwriting Agreement]


Schedule 1

 

Underwriter

   Number of Shares  

J.P. Morgan Securities LLC

Morgan Stanley & Co. LLC

Cowen and Company, LLC

William Blair & Company, L.L.C.

                   
  

 

 

 

Total

  
  

 

 

 


Annex A

a. Pricing Disclosure Package

[To list each Issuer Free Writing Prospectus to be included in the Pricing Disclosure Package]

b. Pricing Information Provided Orally by Underwriters

[Underwritten Shares: [●] shares

Option Shares: [●] shares

Public Offering Price Per Share: $[●]]

 

3


Annex B

Written Testing-the-Waters Communications

None

 

4


Annex C

Berkeley Lights, Inc.

Pricing Term Sheet

[●]

 

5


Exhibit A

Berkeley Lights, Inc.

Testing-the-Waters Authorization Letter

May 15, 2020

J.P. Morgan Securities LLC

Morgan Stanley & Co. LLC

Cowen and Company, LLC

c/o J.P. Morgan Securities LLC

383 Madison Avenue

New York, NY 10179

c/o Morgan Stanley & Co. LLC

1585 Broadway

New York, NY 10036

c/o Cowen and Company, LLC

599 Lexington Avenue

New York, NY 10022

In reliance on Section 5(d) or Rule 163B of the Securities Act of 1933, as amended (the “Act”), Berkeley Lights, Inc. (the “Issuer”) hereby authorizes each of J.P. Morgan Securities LLC (“J.P. Morgan”), Morgan Stanley & Co. LLC (“Morgan Stanley”) and Cowen and Company, LLC (“Cowen”) and the affiliates and respective employees of each, to engage on behalf of the Issuer in oral and written communications with potential investors that are “qualified institutional buyers”, as defined in Rule 144A under the Act, or institutions that are “accredited investors”, within the meaning of Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Act, to determine whether such investors might have an interest in the Issuer’s contemplated initial public offering (“Testing-the-Waters Communications”). A “Written Testing-the Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Act. Any Written Testing-the-Waters Communication shall be subject to prior approval by the Issuer’s Chief Financial Officer prior to its dissemination to a potential investor, provided, however, that no such approval shall be required for any written communication that is solely administrative in nature (i.e., scheduling meetings) or that solely contains information already contained in a communication previously approved by the Issuer’s Chief Financial Officer. The Issuer has advised J.P. Morgan, Morgan Stanley and Cowen that it does not intend to provide or authorize any written communications to potential investors other than communications that are solely administrative in nature, including communications that are contemplated by this authorization.

The Issuer represents that (i) except as disclosed to J.P. Morgan, Morgan Stanley and Cowen, it has not alone engaged in any Testing-the-Waters Communication and (ii) it has not authorized anyone other than J.P. Morgan, Morgan Stanley and Cowen to engage in Testing-the-Waters Communications. The Issuer agrees that it shall not authorize any other third party to engage on

 

6


its behalf in oral or written communications with potential investors without the written consent of J.P. Morgan, Morgan Stanley and Cowen. The Issuer also represents that it is an “emerging growth company” as defined in Section 2(a)(19) of the Act (“Emerging Growth Company”) and agrees to promptly notify J.P. Morgan, Morgan Stanley and Cowen in writing if the Issuer hereafter ceases to be an Emerging Growth Company while this authorization is in effect. If at any time following the distribution of any Written Testing-the-Waters Communication there occurs an event or development as a result of which such Written Testing-the-Waters Communication included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances existing at that subsequent time, not misleading, the Issuer will promptly notify J.P. Morgan, Morgan Stanley and Cowen and will promptly amend or supplement, at its own expense, such Written Testing-the-Waters Communication to eliminate or correct such untrue statement or omission.

Nothing in this authorization is intended to limit or otherwise affect the ability of J.P. Morgan, Morgan Stanley and Cowen and the affiliates and respective employees of each, to engage in communications in which they could otherwise lawfully engage in the absence of this authorization, including, without limitation, any written communication containing only one or more of the statements specified under Rule 134(a) under the Act. This authorization shall remain in effect until the Issuer has provided to J.P. Morgan, Morgan Stanley and Cowen a written notice revoking this authorization. All notices as described herein shall be sent by email to the attention of Benjamin Burdett at benjamin.h.burdett@jpmorgan.com, Robert Shepardson at robert.shepardson@morganstanely.com and Michael Campbell at michael.campbell@cowen.com.

[Remainder of Page Intentionally Left Blank]

 

7


Very truly yours,
Berkeley Lights, Inc.
By:  

         

Name:           
Title:           

 

8


Exhibit B

Form of Waiver of Lock-up

J.P. MORGAN SECURITIES LLC

MORGAN STANLEY & CO. LLC

Berkeley Lights, Inc.

Public Offering of Common Stock

, 2020

[Name and Address of

Officer or Director

Requesting Waiver]

Dear Mr./Ms. [Name]:

This letter is being delivered to you in connection with the offering by Berkeley Lights, Inc. (the “Company”) of ______ shares of common stock, $___ par value (the “Common Stock”), of the Company and the lock-up letter dated__________________, 20__ (the “Lock-up Letter”), executed by you in connection with such offering, and your request for a [waiver] [release] dated__________________, 20__, with respect to ______ shares of Common Stock (the “Shares”).

J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC hereby agree to [waive] [release] the transfer restrictions set forth in the Lock-up Letter, but only with respect to the Shares, effective __________________, 20__; provided, however, that such [waiver] [release] is conditioned on the Company announcing the impending [waiver] [release] by press release through a major news service at least two business days before effectiveness of such [waiver] [release]. This letter will serve as notice to the Company of the impending [waiver] [release].

Except as expressly [waived] [released] hereby, the Lock-up Letter shall remain in full force and effect.

[Signature page follows]

 

9


Yours very truly,
J.P. MORGAN SECURITIES LLC
By:  

         

  Authorized Signatory
  Name:
  Title:
MORGAN STANLEY & CO. LLC
By:  

         

  Authorized Signatory
  Name:
  Title:

cc: Berkeley Lights, Inc.

 

10


Exhibit C

Form of Press Release

Berkeley Lights, Inc.

[Date]

Berkeley Lights, Inc. (“Company”) announced today that J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC, book-running managers in the Company’s recent public sale of                shares of common stock, are [waiving] [releasing] a lock-up restriction with respect to shares of the Company’s common stock held by [certain officers or directors] [an officer or director] of the Company. The [waiver] [release] will take effect on ____________________, 20__, and the shares may be sold on or after such date.    

This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 

11


Exhibit D

FORM OF LOCK-UP AGREEMENT

            , 2020

J.P. MORGAN SECURITIES LLC

MORGAN STANLEY & CO. LLC

COWEN AND COMPANY, LLC

As Representatives of

the several Underwriters listed in

Schedule 1 to the Underwriting

Agreement referred to below

c/o J.P. Morgan Securities LLC

383 Madison Avenue

New York, NY 10179

c/o Morgan Stanley & Co. LLC

1585 Broadway

New York, NY 10036

c/o Cowen and Company, LLC

599 Lexington Avenue

New York, NY 10022

Re: Berkeley Lights, Inc. — Public Offering

Ladies and Gentlemen:

The undersigned understands that you, as Representatives of the several Underwriters, propose to enter into an underwriting agreement (the “Underwriting Agreement”) with Berkeley Lights, Inc., a Delaware corporation (the “Company”), providing for the public offering (the “Public Offering”) by the several Underwriters named in Schedule 1 to the Underwriting Agreement (the “Underwriters”), of common stock of the Company (the “Securities”) pursuant to a Registration Statement on Form S-1 to be filed with the Securities and Exchange Commission (the “SEC”). Capitalized terms used herein and not otherwise defined shall have the meanings set forth in the Underwriting Agreement.

In consideration of the Underwriters’ agreement to purchase and make the Public Offering of the Securities, and for other good and valuable consideration receipt of which is hereby acknowledged, the undersigned hereby agrees that, without the prior written consent of J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC on behalf of the several Underwriters, the undersigned will not, and will not cause any direct or indirect affiliate to, during the period beginning on the date of this letter agreement (this “Letter Agreement”) and ending at the close of business on the 180th day after the date of the final prospectus (such date of the final prospectus, the “Public Offering Date”) relating to the Public Offering (the “Prospectus”) (such period, the “Restricted Period”), (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase,

 

12


purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock, $0.00005 per share par value, of the Company (the “Common Stock”) or any securities convertible into or exercisable or exchangeable for Common Stock (including without limitation, Common Stock or such other securities which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the SEC and securities which may be issued upon exercise of a stock option or warrant) (collectively with the Common Stock, “Lock-Up Securities”), (2) enter into any hedging, swap or other agreement or transaction that transfers, in whole or in part, any of the economic consequences of ownership of the Lock-Up Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Lock-Up Securities, in cash or otherwise, (3) make any demand for or exercise any right with respect to the registration of any Lock-Up Securities, or (4) publicly disclose the intention to do any of the foregoing. The undersigned acknowledges and agrees that the foregoing precludes the undersigned from engaging in any hedging or other transactions or arrangements (including, without limitation, any short sale or the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) designed or intended, or which could reasonably be expected to lead to or result in, a sale or disposition or transfer (whether by the undersigned or any other person) of any economic consequences of ownership, in whole or in part, directly or indirectly, of any Lock-Up Securities, whether any such transaction or arrangement (or instrument provided for thereunder) would be settled by delivery of Lock-Up Securities, in cash or otherwise. The undersigned further confirms that it has furnished J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC with the details of any transaction the undersigned, or any of its affiliates, is a party to as of the date hereof, which transaction would have been restricted by this Letter Agreement if it had been entered into by the undersigned during the Restricted Period.

Notwithstanding the foregoing, the undersigned may:

(a) transfer or dispose of the undersigned’s Lock-Up Securities:

(i) as a bona fide gift or gifts, or for bona fide estate planning purposes;

(ii) by will, other testamentary document or intestacy;

(iii) to any trust for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, or if the undersigned is a trust, to a trustor or beneficiary of the trust or to the estate of a beneficiary of such trust (for purposes of this Letter Agreement, “immediate family” shall mean any relationship by blood, current or former marriage, domestic partnership or adoption, not more remote than first cousin);

(iv) to a partnership, limited liability company or other entity of which the undersigned and/or the immediate family of the undersigned are the legal and beneficial owner of all of the outstanding equity securities or similar interests;

(v) to a nominee or custodian of a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (iv) above;

(vi) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity, (A) to another corporation, partnership, limited liability company, trust or other business entity that is an affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned, or to any investment fund or other entity

 

13


controlling, controlled by, managing or managed by or under common control with the undersigned or affiliates of the undersigned (including, for the avoidance of doubt, where the undersigned is a partnership, to its general partner or a successor partnership or fund, or any other funds managed by such partnership), or (B) as part of a distribution to members, partners, shareholders or other equity-holders of the undersigned;

(vii) by operation of law, such as pursuant to a qualified domestic order, divorce settlement, divorce decree, separation agreement or other court order;

(viii) to the Company from an employee or other service provider of the Company upon death, disability or termination of employment or service, in each case, of such employee or service provider;

(ix) as part of a sale of the undersigned’s Lock-Up Securities acquired (A) in open market transactions after the Public Offering Date or (B) from the Underwriters in the Public Offering;

(x) to the Company in connection with the vesting, settlement, or exercise of restricted stock units, options, warrants or other rights to purchase shares of Common Stock (including, in each case, by way of “net” or “cashless” exercise), including for the payment of exercise price and tax and remittance payments due as a result of the vesting, settlement, or exercise of such restricted stock units, options, warrants or rights, provided that any such shares of Common Stock received upon such exercise, vesting or settlement shall be subject to the terms of this Letter Agreement, and provided further that any such restricted stock units, options, warrants or rights are held by the undersigned pursuant to an (A) agreement or (B) equity awards granted under an equity incentive plan, stock purchase plan or other equity award plan (each, an “Equity Plan”), each such agreement or Equity Plan which is described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or filed as an exhibit to the Registration Statement, or

(xi) pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction that is approved by the Board of Directors of the Company and made to all holders of the Company’s capital stock involving a Change of Control (as defined below) of the Company (for purposes hereof, “Change of Control” shall mean the transfer (whether by tender offer, merger, consolidation or other similar transaction), in one transaction or a series of related transactions, to a person or group of affiliated persons, of shares of capital stock if, after such transfer, such person or group of affiliated persons would hold more than 75% of the outstanding voting securities of the Company (or the surviving entity)); provided that in the event that such tender offer, merger, consolidation or other similar transaction is not completed, the undersigned’s Lock-Up Securities shall remain subject to the provisions of this Letter Agreement;

provided that (A) in the case of any transfer, distribution or other disposition pursuant to clauses (a)(i), (ii), (iii), (iv), (v), (vi) and (vii), such transfer shall not involve a disposition for value and each donee, devisee, transferee or distributee shall execute and deliver to the Representatives a lock-up letter in the form of this Letter Agreement; (B) in the case of any transfer, distribution or other disposition pursuant to clauses (a)(i), (ii), (iii), (iv), (v), (vi) and (ix), no filing by any party (donor, donee, devisee, transferor, transferee, distributer or distributee) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or other public announcement shall be required or shall be made voluntarily in connection with such transfer or distribution (other than a filing on a Form 5 made after the expiration of the Restricted Period

 

14


referred to above or a filing on Schedule 13F or 13G that is required to be filed during the Restricted Period); and (C) in the case of any transfer or distribution pursuant to clauses (a)(vii), (viii) and (x) it shall be a condition to such transfer that no public filing, report or announcement shall be voluntarily made and if any filing under Section 16(a) of the Exchange Act, or other public filing, report or announcement reporting a reduction in beneficial ownership of shares of Common Stock in connection with such transfer or distribution shall be legally required during the Restricted Period, such filing, report or announcement shall clearly indicate in the footnotes thereto the nature and conditions of such transfer;

(b) exercise options, settle restricted stock units or other equity awards or exercise warrants outstanding as of the date granted pursuant to Equity Plans or agreements described in the Registration Statement, the Pricing Disclosure Package and the Prospectus, or filed as exhibits to the Registration Statement; provided that any Lock-up Securities received upon such exercise, vesting or settlement shall be subject to the terms of this Letter Agreement;

(c) convert outstanding preferred stock, warrants to acquire preferred stock or other convertible securities into shares of Common Stock or warrants to acquire shares of Common Stock, provided that any such shares of Common Stock or warrants received upon such conversion shall be subject to the terms of this Letter Agreement;

(d) establish one or more trading plans pursuant to Rule 10b5-1 under the Exchange Act for the transfer or disposition of Lock-Up Securities; provided that (1) such plans do not provide for the transfer or disposition of Lock-Up Securities during the Restricted Period and (2) no filing by any party under the Exchange Act or other public announcement shall be required or made voluntarily in connection with such trading plan during the Restricted Period in contravention of this Lock-Up Agreement; and

(e) sell the Securities to be sold by the undersigned pursuant to the terms of the Underwriting Agreement.

If the undersigned is not a natural person, the undersigned represents and warrants that no single natural person, entity or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) beneficially owns, directly or indirectly, 50% or more of the common equity interests, or 50% or more of the voting power, in the undersigned, except as otherwise disclosed to the Representatives.

If the undersigned is an officer or director of the Company, the undersigned further agrees that the foregoing provisions shall be equally applicable to any Company-directed Securities the undersigned may purchase in the Public Offering.

If the undersigned is an officer or director of the Company, (i) J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC on behalf of the several Underwriters agree that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Lock-Up Securities, J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC on behalf of the several Underwriters will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Underwriting Agreement to announce the impending release or waiver through a major news service at least two business days before the effective date of the release or waiver. Any release or waiver granted by J.P. Morgan Securities LLC and Morgan Stanley & Co. LLC on behalf of the several Underwriters hereunder to any such officer or director shall only be effective two business days after the publication date of such announcement. The provisions of this paragraph will not apply if (a) the release

 

15


or waiver is effected solely to permit a transfer not for consideration or that is to an immediate family member as defined in FINRA Rule 5130(i)(5) and (b) the transferee has agreed in writing to be bound by the same terms described in this Letter Agreement to the extent and for the duration that such terms remain in effect at the time of the transfer.

In furtherance of the foregoing, the Company, and any duly appointed transfer agent for the registration or transfer of the securities described herein, are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Letter Agreement.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Letter Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or personal representatives of the undersigned.

The undersigned understands that, if either (i) the Representatives, on the one hand, or the Company, on the other hand, informs the other, prior to the execution of the Underwriting Agreement, that it has determined not to proceed with the Public Offering, (ii) the Registration Statement is withdrawn, (iii) the Underwriting Agreement does not become effective by December 31, 2020, or (iv) the Underwriting Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Common Stock to be sold thereunder, this Letter Agreement shall automatically terminate and be of no further force and effect and the undersigned shall be released from all obligations under this Letter Agreement. The undersigned understands that the Underwriters are entering into the Underwriting Agreement and proceeding with the Public Offering in reliance upon this Letter Agreement.

This Letter Agreement and any claim, controversy or dispute arising under or related to this Letter Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflicts of laws principles thereof.

[Signature page follows]

 

16


Very truly yours,
IF A NATURAL PERSON:     IF AN ENTITY OR TRUST:
By:  

         

   

             

 

         

          (Please print complete name of entity)
  (Duly authorized signature)      
Name:  

             

    By:  

 

 

   

         

(Please print full name)     (Duly authorized signature)
      Name:  

         

        (Please print full name)
      Title:  

         

        (Please print full title)
Address:       Address:  

         

   

         

         

   

         

E-mail:  

         

    E-mail:  

 

Exhibit 3.1

BERKELEY LIGHTS, INC.

RESTATED CERTIFICATE OF INCORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

Berkeley Lights, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), does hereby certify as follows.

1. The name of this corporation is Berkeley Lights, Inc. This corporation was originally incorporated pursuant to the General Corporation Law on April 5, 2011 under the name Berkeley Lights, Inc.

2. The Board of Directors of this corporation duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation, which resolution setting forth the proposed amendment and restatement is as follows.

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as set forth on Exhibit A attached hereto and incorporated herein by this reference.

Exhibit A referred to in the resolution above is attached hereto as Exhibit A and is hereby incorporated herein by this reference.

3. This Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

4. This Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this 28th day of March, 2018.

 

By:   /s/ Eric Hobbs
  Eric Hobbs, President and Chief Executive Officer


EXHIBIT A BERKELEY LIGHTS, INC.

RESTATED CERTIFICATE OF INCORPORATION

ARTICLE I: NAME.

The name of this corporation is Berkeley Lights, Inc. (the “Corporation”).

ARTICLE II: REGISTERED OFFICE.

The address of the registered office of the Corporation in the State of Delaware is 3500 South Dupont Highway, City of Dover, County of Kent, Delaware 19901. The name of its registered agent at such address is Incorporating Services, Ltd.

ARTICLE III: PURPOSE.

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

ARTICLE IV: AUTHORIZED SHARES.

The total number of shares of all classes of stock which the Corporation shall have authority to issue is (a) One Hundred Twenty Million Six Hundred Thousand (120,600,000) shares of Common Stock, $0.00005 par value per share (“Common Stock”), and (b) Ninety-Seven Million Eight Hundred Sixteen Thousand Four Hundred (97,816,400) shares of Preferred Stock, $0.00005 par value per share (“Preferred Stock”). As of the effective date of this Restated Certificate of Incorporation (this “Restated Certificate”), Seven Million Three Hundred Twenty Thousand (7,320,000) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock”, Three Million Two (3,000,002) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Preferred Stock”, Fourteen Million Forty-Nine Thousand Eight Hundred Seventy-Six (14,049,876) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series A-2 Preferred Stock”, Twenty Seven Million One Hundred Eighty Four Thousand Six Hundred Eighty-Three (27,184,683) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Preferred Stock”, Twenty Million (20,000,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series C Preferred Stock”, Eleven Million Eight Hundred Eighty-Six Thousand Eight Hundred Thirty-Nine (11,886,839) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series D Preferred Stock” and Fourteen Million Three Hundred Seventy-Five Thousand (14,375,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series E Preferred Stock”.

The following is a statement of the designations and the rights, powers and preferences, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation.

 

1


A.

COMMON STOCK

1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

2. Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). Unless required by law, there shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Restated Certificate) the affirmative vote of the holders of shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law and without a separate class vote of the holders of the Common Stock.

 

B.

PREFERRED STOCK

The following rights, powers and preferences, and restrictions, qualifications and limitations, shall apply to the Preferred Stock. Unless otherwise indicated, references to “Sections” in this Part B of this Article IV refer to sections of this Part B.

1. Dividends.

1.1 Non-Cumulative Series E Preferred Stock Dividend Preference. From and after the date of the issuance of any shares of Series E Preferred Stock, the Corporation shall not pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) in any calendar year unless (in addition to the obtaining of any consents required elsewhere in this Restated Certificate) the holders of the Series E Preferred Stock then outstanding shall first receive, or simultaneously receive, out of funds legally available therefor, a dividend on each outstanding share of Series E Preferred Stock in an amount equal to 8% of the Original Issue Price (as defined below) per share of the Series E Preferred Stock. The foregoing dividends shall not be cumulative and shall be paid when, as and if declared by the Board of Directors of the Corporation (the “Board”). The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series E Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series E Preferred Stock in an amount at least equal to the greater of (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series E Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series E Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a

 

2


dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series E Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series E Original Issue Price (as defined below); provided that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series E Preferred Stock pursuant to this Section 1.1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series E Preferred Stock dividend.

1.2 Cumulative Series D Preferred Stock Dividend Preference. From and after the date of the issuance of any shares of Series D Preferred Stock, dividends at the rate per annum of $0.269 per share shall accrue on such shares of Series D Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Preferred Stock) (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided, however, that except as set forth in the following sentence of this Section 1.2 or in Section 2.1, such Accruing Dividends shall be payable (i) after payment or declaration and setting apart of the dividends in the full preferential amount specified in Section 1.1 above for the Series E Preferred Stock, and (ii) only when, as, and if declared by the Board and the Corporation shall be under no obligation to pay such Accruing Dividends. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series D Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series D Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Accruing Dividends then accrued on such share of Series D Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series D Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series D Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series D Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series D Original Issue Price (as defined below); provided that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series D Preferred Stock pursuant to this Section 1.2 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series D Preferred Stock dividend.

 

3


1.3 Non-Cumulative Prior Senior Preferred Stock Dividend Preference. After payment or declaration and setting apart of the dividends in the full preferential amount specified in Section 1.1 and Section 1.2 above for the Series E Preferred Stock and the Series D Preferred Stock, respectively, the holders of shares of Series B Preferred Stock and Series C Preferred Stock (collectively, the “Prior Senior Preferred Stock”) shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on the Series A Preferred Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock (collectively, the “Junior Preferred Stock”) and the Common Stock of the Corporation, in an amount equal to 8% of the Original Issue Price (as defined below) per share of such Prior Senior Preferred Stock. The foregoing dividends shall not be cumulative and shall be paid when, as and if declared by the Board.

1.4 Non-Cumulative Junior Preferred Stock Dividend Preference. After payment or declaration and setting apart of the dividends in the full preferential amount specified in Section 1.1, Section 1.2 and Section 1.3 above for the Series E Preferred Stock, the Series D Preferred Stock and the Prior Senior Preferred Stock, respectively, the Corporation shall not pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) in any calendar year unless (in addition to the obtaining of any consents required elsewhere in this Restated Certificate) the holders of the Junior Preferred Stock then outstanding shall first receive, or simultaneously receive, out of funds legally available therefor, a dividend on each outstanding share of Junior Preferred Stock in an amount equal to 8% of the Original Issue Price (as defined below) per share of such Junior Preferred Stock. The foregoing dividends shall not be cumulative and shall be paid when, as and if declared by the Board. The “Original Issue Price” means, (i) for the Series A Preferred Stock, $0.025 per share, (ii) for the Series A-1 Preferred Stock, $0.1666665 per share, (iii) for the Series A-2 Preferred Stock, $0.2847 per share, (iv) for the Series B Preferred Stock, $1.073 per share, (v) for the Series C Preferred Stock, $2.93 per share, (vi) for the Series D Preferred Stock, $3.365 per share and (vii) for the Series E Preferred Stock, $5.2177 per share (in each case subject to appropriate adjustment in the event of any stock splits and combinations of shares and for dividends paid on the such series of Preferred Stock in shares of such stock).

1.5 Participation. If, after dividends in the full preferential amount specified in Section 1.1, Section 1.2, Section 1.3 and Section 1.4 above for the Preferred Stock have been paid or set apart for payment in any calendar year of the Corporation, the Board shall declare additional dividends out of funds legally available therefor in that calendar year, then such additional dividends shall be declared pro rata on the Common Stock and the Preferred Stock on a pari passu basis according to the number of shares of Common Stock held by such holders. For this purpose each holder of shares of Preferred Stock is to be treated as holding the greatest whole number of shares of Common Stock then issuable upon conversion of all shares of Preferred Stock held by such holder pursuant to Sections 4 and 5.

1.6 Non-Cash Dividends. Whenever a dividend provided for in this Section 1 shall be payable in property other than cash, the value of such dividend shall be deemed to be the fair market value of such property as determined in good faith by the Board.

 

4


2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

2.1 Payments to Holders of Series E Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), before any payment shall be made to the holders of Series D Preferred Stock, Prior Senior Preferred Stock, Junior Preferred Stock or Common Stock by reason of their ownership thereof, the holders of shares of Series E Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such Series E Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such Series E Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Series E Preferred Stock the full amounts to which they are entitled under this Section 2.1, the holders of shares of Series E Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Series E Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.2 Payments to Holders of Series D Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), after the payment of all preferential amounts required to be paid to the holders of shares of Series E Preferred Stock as provided in Section 2.1 before any payment shall be made to the holders of Prior Senior Preferred Stock, Junior Preferred Stock or Common Stock by reason of their ownership thereof, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such Series D Preferred Stock, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such Series D Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Series D Preferred Stock the full amounts to which they are entitled under this Section 2.2, the holders of shares of Series D Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Series D Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.3 Payments to Holders of Prior Senior Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), after the payment of all preferential amounts required to be paid to the holders of shares of Series E Preferred Stock as provided in Section 2.1 and the payment

 

5


of all preferential amounts required to be paid to the holders of shares of Series D Preferred Stock as provided in Section 2.2 and before any payment shall be made to the holders of Junior Preferred Stock or Common Stock by reason of their ownership thereof, the holders of shares of Prior Senior Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such series of Prior Senior Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such series of Prior Senior Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Prior Senior Preferred Stock the full amounts to which they are entitled under this Section 2.3, the holders of shares of Prior Senior Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Prior Senior Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.4 Payments to Holders of Junior Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Series E Preferred Stock as provided in Section 2.1, to be paid to the holders of shares of Series D Preferred Stock as provided in Section 2.2 and to the holders of shares of Prior Senior Preferred Stock as provided in Section 2.3, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, the holders of shares of Junior Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such series of Junior Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such series of Junior Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Junior Preferred Stock the full amounts to which they are entitled under this Section 2.4, the holders of shares of Junior Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Junior Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.5 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock as provided in Section 2.1, Section 2.2, Section 2.3 and Section 2.4, the remaining funds and assets available for distribution to the stockholders of the Corporation shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares of Common Stock held by each such holder.

 

6


2.6 Deemed Liquidation Events.

2.6.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least 60% of the outstanding shares of Preferred Stock (voting together as a single class on an as-converted basis) elect otherwise by written notice sent to the Corporation at least five days prior to the effective date of any such event:

(a) a merger or consolidation (each a “Combination”) in which (i) the Corporation is a constituent party or (ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such Combination, except any such Combination involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such Combination continue to represent, or are converted into or exchanged for equity securities that represent, immediately following such Combination, at least a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such Combination, the parent of such surviving or resulting party; provided that, for the purpose of this Section 2.6.1, all shares of Common Stock issuable upon exercise of Options (as defined in Section 5 below) outstanding immediately prior to such Combination or upon conversion of Convertible Securities (as defined in Section 5 below) outstanding immediately prior to such Combination shall be deemed to be outstanding immediately prior to such Combination and, if applicable, deemed to be converted or exchanged in such Combination on the same terms as the actual outstanding shares of Common Stock are converted or exchanged; or

(b) the sale, lease, exclusive license, transfer or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary or subsidiaries of the Corporation, that constitutes an effective disposition of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole (or, if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by one or more subsidiaries, the sale or disposition (whether by consolidation, merger, conversion or otherwise) of such subsidiaries of the Corporation), except where such sale, lease, exclusive license, transfer or other disposition is made to the Corporation or one or more wholly owned subsidiaries of the Corporation (an “Asset Disposition”).

2.6.2 Allocation of Escrow. In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the definitive agreement or escrow agreement entered into in connection with such Deemed Liquidation Event shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2, 2.3, 2.4 and 2.5 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2, 2.3, 2.4 and 2.5 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.6.2, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

 

7


2.6.3 Amount Deemed Paid or Distributed. The funds and assets deemed paid or distributed to the holders of capital stock of the Corporation upon any such Combination or Asset Distribution shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. If the amount deemed paid or distributed under this Section 2.6.3 is made in property other than in cash, the value of such distribution shall be the fair market value of such property, as determined in good faith by the Board (including at least the Series B Director or one Series C Director); provided, however, that the following shall apply. For securities not subject to investment letters or other similar restrictions on free marketability:

(A) if traded on a securities exchange or the NASDAQ Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the 30-day period ending three days prior to the closing of such transaction;

(B) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing of such transaction; or

(C) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.

The method of valuation of securities subject to investment letters or other similar restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall take into account an appropriate discount (as determined in good faith by the Board) from the market value as determined pursuant to clause (a) above so as to reflect the approximate fair market value thereof.

3. Voting.

3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Fractional votes shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Except as provided by law or by the other provisions of this Restated Certificate, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted basis, shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation.

 

8


3.2 Election of Directors.

3.2.1 Election. For so long as at least 1,000,000 shares of Junior Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Junior Preferred Stock in shares of such stock), the holders of record of the shares of Junior Preferred Stock, voting together as a single class, shall be entitled to elect two (2) directors of the Corporation (each, a “Junior Preferred Director”). For so long as at least 1,000,000 shares of Series B Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series B Preferred Stock in shares of such stock), the holders of record of the shares of Series B Preferred Stock, voting together as a single class, shall be entitled to elect one (1) director of the Corporation (the “Series B Director”). For so long as at least 1,000,000 shares of Series C Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series C Preferred Stock in shares of such stock), the holders of record of the shares of Series C Preferred Stock, voting together as a single class, shall be entitled to elect two (2) directors of the Corporation (each, a “Series C Director”). For so long as at least 1,000,000 shares of Series E Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series E Preferred Stock in shares of such stock), the holders of record of the shares of Series E Preferred Stock, voting together as a single class, shall be entitled to elect one (1) director of the Corporation (the “Series E Director”). The holders of record of the shares of Common Stock, voting together as a single class, shall be entitled to elect one (1) director of the Corporation (the “Common Director”). The holders of record of the shares of Common Stock and of every other class or series of voting stock (including the Preferred Stock), voting together as a single class on an as-converted basis, shall be entitled to elect the remaining number of directors of the Corporation (each, a “Remaining Director”).

3.2.2 Vacancies Not Caused by Removal. Any vacancy in the office of any director may be filled by the stockholders as specified in this Section 3.2 or by at least a majority of the members of the Board then in office, although less than a quorum, or by a sole remaining member of the Board then in office, even if such directors or such sole remaining director were not elected by the holders of the class, classes or series that are entitled to elect a director or directors to office under the provisions of Section 3.2.1 (the “Specified Stock”) and such electing director or directors shall specify at the time of such election the specific vacant directorship being filled.

3.2.3 Vacancies Caused by Removal. Any director elected as provided in the preceding paragraphs may be removed without cause by, and any vacancy in the office of any such removed director may be filled by, and only by, the affirmative vote of the holders of the shares of the Specified Stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.

3.2.4 Procedure. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the Specified Stock entitled to elect such director shall constitute a quorum for the purpose of electing such director and the candidate or candidates to be elected by such Specified Stock shall be those who receive the highest number of affirmative votes (on an as-converted basis) of the

 

9


outstanding shares of such Specified Stock; provided however that in the case of Series B Preferred Stock, the affirmative vote of the holders of at least 60% of the Series B Preferred Stock shall be required. In the case of an action taken by written consent without a meeting, the candidate or candidates to be elected by such Specified Stock shall be those who are elected by the written consent of the holders of a majority of such Specified Stock; provided however that in the case of Series B Preferred Stock, the written consent of the holders of at least 60% of the Series B Preferred Stock shall be required.

3.3 Preferred Stock Protective Provisions. At any time when at least 1,000,000 shares of Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent, or affirmative vote at a meeting and evidenced in writing, of the holders of at least 60% of the then outstanding shares of Preferred Stock, consenting or voting together as a single class on an as-converted basis:

(a) alter or change the rights, powers or preferences of the Preferred Stock (or any series thereof) set forth in the certificate of incorporation of the Corporation;

(b) increase or decrease the authorized number of shares of Common Stock or Preferred Stock (or any series thereof);

(c) authorize or create (by reclassification or otherwise) any new class or series of capital stock having rights, powers or preferences set forth in the certificate of incorporation of the Corporation, as then in effect, that are senior to or on a parity with any series of Preferred Stock or authorize or create (by reclassification or otherwise) any security convertible into or exercisable for any such new class or series of capital stock;

(d) redeem or repurchase any shares of Common Stock or Preferred Stock, other than (i) pursuant to an agreement with an employee, consultant, director or other service provider to the Corporation or any of its wholly owned subsidiaries (collectively, “Service Providers”) giving the Corporation the right to repurchase shares at the original cost thereof upon the termination of services, (ii) an exercise of a right of first refusal in favor of the Corporation pursuant to an agreement with any Service Provider, which exercise has been approved by the Board;

(e) declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock, other than a dividend on the Common Stock payable in shares of Common Stock;

(f) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent, agree or commit to any of the foregoing without conditioning such consent, agreement or commitment upon obtaining the approval required by this Section 3.3;

(g) increase or decrease the authorized number of directors constituting the Board;

 

10


(h) otherwise amend, alter, restate, or repeal any provision of the certificate of incorporation or the bylaws of the Corporation, as then in effect; or

(i) (i) create, issue, offer, sell, distribute or sponsor any Tokens, whether or not for consideration, including through any agreement for future Tokens, instrument convertible or exercisable into Tokens or any other Token pre-sale or derivative agreement, (ii) develop a software protocol or network permitting, incentivizing or facilitating the generation, exchange, trade, offer, sale or use of Tokens by protocol or network participants, or (iii) cause or permit any of the Corporation’s subsidiaries, Related Nonprofits, affiliates, officers, directors, key employees, agents or other representatives to take any such actions; where, for the purposes of this provision:

(A) “Tokens” shall mean any cryptocurrency, decentralized application tokens, protocol tokens, blockchain-based tokens, assets or other cryptofinance coins, tokens or similar digital assets; and

(B) “Related Nonprofits” shall mean any not-for-profit, non-governmental organization or other entity that has no equity holders (including without limitation all trusts), wherever domiciled, (x) for which any of the Corporation, its affiliates or any of its or their officers, directors, key employees or their respective immediate family members or affiliates (“Related Parties”) are controlling voting members; (y) for which any Related Parties serve as officers or directors; or (z) with which the Corporation or any Related Parties have entered into a contractual relationship providing for payments of value or governance rights that are material to either party.

3.4 Series B Preferred Stock Protective Provisions. For so long as 1,000,000 shares of Series B Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, without the approval, by vote or written consent, of the holders of at least 60% of the Series B Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class; or

(b) increase or decrease the authorized number of shares of Series B Preferred Stock.

 

11


3.5 Series C Preferred Stock Protective Provisions. For so long as 1,000,000 shares of Series C Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, without the approval, by vote or written consent, of the holders of at least a majority of the Series C Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series C Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class; or

(b) increase or decrease the authorized number of shares of Series C Preferred Stock.

3.6 Series D Preferred Stock Protective Provisions. For so long as 1,000,000 shares of Series D Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not (whether undertaken by merger, consolidation, or otherwise), without the approval, by vote or written consent, of the holders of at least a majority of the Series D Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series D Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class;

(b) increase or decrease the authorized number of shares of Series D Preferred Stock;

(c) amend this Section 3.6; or

(d) agree or commit to do, or authorize any of, the foregoing.

3.7 Series E Preferred Stock Protective Provisions. For so long as 1,000,000 shares of Series E Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock), the Corporation shall not, without the approval, by vote or written consent, of the holders of at least a majority of the Series E Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series E Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class; or

(b) increase or decrease the authorized number of shares of Series E Preferred Stock.

4. Conversion Rights. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

4.1 Right to Convert.

4.1.1 Conversion Ratio. Each share of a series of Preferred Stock shall be convertible, at the option of the holder thereof, at any time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for such series of Preferred

 

12


Stock by the Conversion Price (as defined below) for such series of Preferred Stock in effect at the time of conversion. The “Conversion Price” for each series of Preferred Stock shall initially mean the Original Issue Price for such series of Preferred Stock. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided in Section 5.

4.1.2 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent (a “Contingency Event”). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or such holder’s attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice (or, if later, the date on which all Contingency Events have occurred) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such time. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of Preferred Stock, or to such holder’s nominee(s), a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (b) pay in cash such amount as provided in Section 5.7.3 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (c) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

4.1.3 Effect of Voluntary Conversion. All shares of Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 5.7.3 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued.

 

13


4.2 Mandatory Conversion.

4.2.1 Automatic Conversion. Upon either (a) the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act resulting in at least $70,000,000 of gross proceeds to the Corporation, following which the Common Stock will be listed or admitted for trading on the New York Stock Exchange or The Nasdaq Stock Market trading platforms or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the holders of at least 60% of the outstanding shares of Preferred Stock at the time of such vote or consent, voting together as a single class on an as-converted basis (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), (x) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the applicable ratio described in Section 4.1.1 as the same may be adjusted from time to time in accordance with this Section 4 and (y) such shares may not be reissued by the Corporation.

4.2.2 Mandatory Conversion Procedural Requirements.

(a) All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to Sections 4.2.1 and 10. Unless otherwise provided in this Restated Certificate, such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender such holder’s certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 4.2.

(b) If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or by such holder’s attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to this Section 4.2, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 4.2.2(b). As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to such holder’s nominee(s), a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 5.7.3 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock (and the applicable series thereof) accordingly.

 

14


4.3 Termination of Conversion Rights. Subject to Section 4.1.2 in the case of a Contingency Event, in the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the third day preceding the date fixed for the first payment of any funds and assets distributable on such event to the holders of Preferred Stock.

5. Adjustments to Conversion Price.

5.1 Adjustments for Diluting Issuances.

5.1.1 Special Definitions. For purposes of this Article IV, the following definitions shall apply:

(a) “Option” shall mean any right, option or warrant to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities from the Corporation.

(b) “Original Issue Date” for a series of Preferred Stock shall mean the date on which the first share of such series of Preferred Stock was issued.

(c) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities issued by the Corporation that are directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(d) “Additional Shares of Common Stock” with respect to a series of Preferred Stock shall mean all shares of Common Stock issued (or, pursuant to Section 5.1.2 below, deemed to be issued) by the Corporation after the applicable Original Issue Date for such series of Preferred Stock, other than the following shares of Common Stock and shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (collectively as to all such shares and shares deemed issued, “Exempted Securities”):

(A) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on such series of Preferred Stock;

(B) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on or subdivision of shares of Common Stock that is covered by Section 5.2, 5.3, 5.4, 5.5 or 5.6;

(C) up to 19,656,695 (or such greater number as may be approved from time to time by the Board (including at least the Series B Director or one Series C Director) shares of Common Stock or Options to acquire shares of Common Stock, including but not limited to stock appreciation rights payable in shares of Common Stock or in Options or Convertible Securities, issued to Service Providers for the primary purpose of soliciting or retaining their services pursuant to a plan, agreement or arrangement approved by the Board, calculated from the Corporation’s inception, net of any repurchases of any such shares by the Corporation, net of any such expired or terminated Options or Convertible Securities and proportionally adjusted to reflect any subsequent adjustment pursuant to Sections 5.2 and 5.3;

 

15


(D) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;

(E) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions pursuant to a debt financing or equipment leasing transaction approved by the Board;

(F) shares of Common Stock, Options or Convertible Securities issued pursuant to a bona fide acquisition of another entity by the Corporation by merger or consolidation with, purchase of substantially all of the assets of, or purchase of more than fifty percent of the outstanding equity securities of, the other entity, or issued pursuant to a bona fide joint venture agreement, provided, that such issuances are approved by the Board;

(G) shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board;

(H) shares of Common Stock, Options or Convertible Securities issued as a result of a decrease in the Conversion Price of any series of Preferred Stock resulting from the operation of Section 5.1.3;

(I) shares of Common Stock issued in an offering to the public pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”) with, and declared effective by, the Securities and Exchange Commission; or

(J) the issuance or deemed issuance of Common Stock if the Corporation receives written notice from the holders of at least 60% of the then outstanding shares of Preferred Stock, on an as-converted basis, agreeing that no adjustment shall be made as a result of the issuance or deemed issuance.

5.1.2 Deemed Issue of Additional Shares of Common Stock.

(a) If the Corporation at any time or from time to time after the applicable Original Issue Date for a series of Preferred Stock shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability (including the passage of time) but without regard to any provision contained therein for a subsequent adjustment of such number including by way of anti-dilution adjustment) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

16


(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Section 5.1.2(b) shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount which exceeds the lower of (1) the Conversion Price for such series of Preferred Stock in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (2) the Conversion Price for such series of Preferred Stock that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3 (either because the consideration per share (determined pursuant to Section 5.1.4) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price of such series of Preferred Stock then in effect, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised after the Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 5.1.2(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted

 

17


(either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3, the Conversion Price of such series of Preferred Stock shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Section 5.1.2 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in Sections 5.1.2(b) and 5.1.2(c)). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to such Conversion Price that would result under the terms of this Section 5.1.2 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

5.1.3 Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the applicable Original Issue Date of a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 5.1.2), without consideration or for a consideration per share less than the Conversion Price for such series of Preferred Stock in effect immediately prior to such issue, then such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-thousandth of a cent) determined in accordance with the following formula:

CP2 = CP1 * (A + B) ÷ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

“CP2” shall mean the applicable Conversion Price in effect immediately after such issue or deemed issue of Additional Shares of Common Stock

“CP1” shall mean the applicable Conversion Price in effect immediately prior to such issue or deemed issue of Additional Shares of Common Stock;

“A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue or deemed issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

 

18


“B” shall mean the number of shares of Common Stock that would have been issued or deemed issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

“C” shall mean the number of such Additional Shares of Common Stock actually issued or deemed issued in such transaction.

5.1.4 Determination of Consideration. For purposes of this Section 5.1, the consideration received by the Corporation for the issue or deemed issue of any Additional Shares of Common Stock shall be computed as follows:

(a) Cash and Property: Such consideration shall:

(A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

(B) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

(C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board.

(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 5.1.2, relating to Options and Convertible Securities, shall be determined by dividing

(A) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(B) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

19


5.1.5 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.2, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period that are a part of such transaction or series of related transactions).

5.2 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Original Issue Date for a series of Preferred Stock effect a subdivision of the outstanding Common Stock, the Conversion Price for such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date for a series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price for such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this section shall become effective at the close of business on the date the subdivision or combination becomes effective.

5.3 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for a series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price for such series of Preferred Stock in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying such Conversion Price then in effect by fraction:

(a) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(b) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing, (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, such Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter

 

20


such Conversion Price shall be adjusted pursuant to this section as of the time of actual payment of such dividends or distributions; and (ii) no such adjustment shall be made if the holders of such series of Preferred Stock simultaneously receive a dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

5.4 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for a series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock), then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities in an amount equal to the amount of such securities as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

5.5 Adjustment for Reclassification, Exchange and Substitution. If, at any time or from time to time after the Original Issue Date for a series of Preferred Stock, the Common Stock issuable upon the conversion of such series of Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Corporation, whether by recapitalization, reclassification or otherwise (other than by a stock split or combination, dividend, distribution, merger or consolidation covered by Sections 5.2, 5.3, 5.4 or 5.6 or by Section 2.6 regarding a Deemed Liquidation Event), then in any such event each holder of such series of Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change.

5.6 Adjustment for Merger or Consolidation. Subject to the provisions of Section 2.6, if there shall occur any consolidation or merger involving the Corporation in which the Common Stock (but not a series of Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 5.1, 5.3, 5.4 or 5.5), then, following any such consolidation or merger, provision shall be made that each share of such series of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of such series of Preferred Stock immediately prior to such consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in Section 4 and this Section 5 with respect to the rights and interests thereafter of the holders of such series of Preferred Stock, to the end that the provisions set forth in Section 4 and this Section 5 shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of such series of Preferred Stock.

 

21


5.7 General Conversion Provisions.

5.7.1 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of a series of Preferred Stock pursuant to this Section 5, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 15 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of any series of Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.

5.7.2 Reservation of Shares. The Corporation shall at all times while any share of Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate. Before taking any action that would cause an adjustment reducing the Conversion Price of a series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

5.7.3 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair value of a share of Common Stock as determined in good faith by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

5.7.4 No Further Adjustment after Conversion. Upon any conversion of shares of Preferred Stock into Common Stock, no adjustment to the Conversion Price of the applicable series of Preferred Stock shall be made with respect to the converted shares for any declared but unpaid dividends on such series of Preferred Stock or on the Common Stock delivered upon conversion.

 

22


6. Redemption. The Preferred Stock is not redeemable at the option of the holder thereof.

7. No Reissuance of Redeemed or Otherwise Acquired Preferred Stock. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights, powers and preferences granted to the holders of Preferred Stock following the close of business on the third day preceding the Redemption Date for such shares.

8. Waiver. Any of the rights, powers, preferences and other terms of the Junior Preferred Stock that are set forth herein may be waived on behalf of all holders of the Junior Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Junior Preferred Stock that are then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series B Preferred Stock that are set forth herein may be waived on behalf of all holders of Series B Preferred Stock as a class by the affirmative written consent or vote of the holders of at least 60% of the shares of Series B Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series C Preferred Stock that are set forth herein may be waived on behalf of all holders of Series C Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Series C Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series D Preferred Stock that are set forth herein may be waived on behalf of all holders of Series D Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Series D Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series E Preferred Stock that are set forth herein may be waived on behalf of all holders of Series E Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Series E Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock.

9. Notice of Record Date. In the event:

(a) the Corporation shall set a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

23


then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or subscription right, and the amount and character of such dividend, distribution or subscription right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent (A) at least 20 days prior to the earlier of the record date or effective date for the event specified in such notice or (B) such fewer number of days as may be approved the holders of at least 60% of the outstanding shares of Preferred Stock acting as a single class on an as-converted basis.

10. Notices. Except as otherwise provided herein, any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation for such holder, given by the holder to the Corporation for the purpose of notice or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission. If no such address appears or is given, notice shall be deemed given at the place where the principal executive office of the Corporation is located.

ARTICLE V: PREEMPTIVE RIGHTS.

No stockholder of the Corporation shall have a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and any stockholder.

ARTICLE VI: STOCK REPURCHASES.

To the extent one or more sections of any other state corporations code setting forth minimum requirements for the Corporation’s retained earnings and/or net assets are applicable to the Corporation’s repurchase of shares of Common Stock, such code sections shall not apply, to the greatest extent permitted by applicable law, in whole or in part with respect to repurchases by the Corporation of its Common Stock from Service Providers pursuant to agreements under which the Corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment. In the case of any such repurchases, such distributions or dividends by this corporation may be made without regard to the “preferential dividends arrears amount” or any “preferential rights amount,” as such terms may be defined in such other state’s corporations code.

 

24


ARTICLE VII: BYLAW PROVISIONS.

 

A.

AMENDMENT OF BYLAWS. Subject to any additional vote required by the Restated Certificate or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

 

B.

NUMBER OF DIRECTORS. Subject to any additional vote required by the Restated Certificate, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

 

C.

BALLOT. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

D.

MEETINGS AND BOOKS. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation.

ARTICLE VIII: DIRECTOR LIABILITY.

 

A.

LIMITATION. To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article VIII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article VIII by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

B.

INDEMNIFICATION. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

 

C.

MODIFICATION. Any amendment, repeal or modification of the foregoing provisions of this Article VIII shall not (a) adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification or (b) increase the liability of any director of the Corporation with respect to any acts or omissions of such director, officer or agent occurring prior to, such amendment, repeal or modification.

 

25


ARTICLE IX: CREDITOR AND STOCKHOLDER COMPROMISES.

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of §291 of Title 8 of the General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under §279 of Title 8 of the General Corporation Law order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

ARTICLE X: EXCLUDED OPPORTUNITY.

The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation while such Covered Person is performing services in such capacity.

 

26


CERTIFICATE OF AMENDMENT TO

CERTIFICATE OF INCORPORATION OF

BERKELEY LIGHTS, INC.

Berkeley Lights, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:

1. The name of the Corporation is Berkeley Lights, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 5, 2011.

2. Pursuant to Section 242 of the General Corporation Law of the State of Delaware (the “DGCL”), this Certificate of Amendment to the Corporation’s Certificate of Incorporation (this “Certificate of Amendment”) hereby amends certain provisions of the Corporation’s Certificate of Incorporation.

3. Pursuant to Section 242 of the DGCL, the Board of Directors of the Corporation duly adopted resolutions setting forth the terms and provisions of this Certificate of Amendment, declaring the terms and provisions of this Certificate of Amendment to be advisable, and directing that the terms and provisions of this Certificate of Amendment be submitted to and considered by the stockholders of the Corporation for approval.

4. The terms and provisions of this Certificate of Amendment have been duly approved by written consent of the required number of shares of outstanding stock of the Corporation entitled to vote thereon, in lieu of a meeting and vote of stockholders, pursuant to Sections 228 and 242 of the DGCL.

5. The first paragraph of Article IV of the Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows:

“The total number of shares of all classes of stock which the Corporation shall have authority to issue is (a) One Hundred Twenty-Four Million Four Hundred Thirty-Three Thousand One Hundred Seven (124,433,107) shares of Common Stock, $0.00005 par value per share (“Common Stock”), and (b) One Hundred One Million Six Hundred Forty-Eight Thousand Six Hundred Fifty Seven (101,648,657) shares of Preferred Stock, $0.00005 par value per share (“Preferred Stock”). As of the effective date of this Restated Certificate of Incorporation (this “Restated Certificate”), Seven Million Three Hundred Twenty Thousand (7,320,000) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock”, Three Million Two (3,000,002) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Preferred Stock”, Fourteen Million Forty-Nine Thousand


Eight Hundred Seventy-Six (14,049,876) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series A-2 Preferred Stock”, Twenty Seven Million One Hundred Eighty Four Thousand Six Hundred Eighty-Three (27,184,683) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Preferred Stock”, Twenty Million (20,000,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series C Preferred Stock”, Eleven Million Eight Hundred Eighty-Six Thousand Eight Hundred Thirty-Nine (11,886,839) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series D Preferred Stock” and Eighteen Million Two Hundred Seven Thousand Two Hundred Fifty-Seven (18,207,257) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series E Preferred Stock”.”

(Signature page follows)


IN WITNESS WHEREOF, Berkeley Lights, Inc. has caused this Certificate of Amendment to be signed by Eric Hobbs, a duly authorized officer of the Corporation, on June 27, 2018.

 

/s/ Eric Hobbs

Eric Hobbs
Chief Executive Officer

[Signature page to Certificate of Amendment]


CERTIFICATE OF AMENDMENT TO

CERTIFICATE OF INCORPORATION OF

BERKELEY LIGHTS, INC.

Berkeley Lights, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:

1. The name of the Corporation is Berkeley Lights, Inc. The Corporation’s original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on April 5, 2011.

2. Pursuant to Section 242 of the General Corporation Law of the State of Delaware (the “DGCL”), this Certificate of Amendment to the Corporation’s Certificate of Incorporation (this “Certificate of Amendment”) hereby amends certain provisions of the Corporation’s Certificate of Incorporation.

3. Pursuant to Section 242 of the DGCL, the Board of Directors of the Corporation duly adopted resolutions setting forth the terms and provisions of this Certificate of Amendment, declaring the terms and provisions of this Certificate of Amendment to be advisable, and directing that the terms and provisions of this Certificate of Amendment be submitted to and considered by the stockholders of the Corporation for approval.

4. The terms and provisions of this Certificate of Amendment have been duly approved by written consent of the required number of shares of outstanding stock of the Corporation entitled to vote thereon, in lieu of a meeting and vote of stockholders, pursuant to Sections 228 and 242 of the DGCL.

5. The first paragraph of Article IV of the Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows:

“The total number of shares of all classes of stock which the Corporation shall have authority to issue is (a) One Hundred Thirty Million Six Hundred Thousand (130,600,000) shares of Common Stock, $0.00005 par value per share (“Common Stock”), and (b) One Hundred One Million Six Hundred Forty-Eight Thousand Six Hundred Fifty Seven (101,648,657) shares of Preferred Stock, $0.00005 par value per share (“Preferred Stock”). As of the effective date of this Restated Certificate of Incorporation (this “Restated Certificate”), Seven Million Three Hundred Twenty Thousand (7,320,000) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock”, Three Million Two (3,000,002) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Preferred Stock”, Fourteen Million Forty-Nine Thousand Eight Hundred Seventy-Six (14,049,876) shares of the authorized


Preferred Stock of the Corporation are hereby designated as “Series A-2 Preferred Stock”, Twenty Seven Million One Hundred Eighty Four Thousand Six Hundred Eighty-Three (27,184,683) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Preferred Stock”, Twenty Million (20,000,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series C Preferred Stock”, Eleven Million Eight Hundred Eighty-Six Thousand Eight Hundred Thirty-Nine (11,886,839) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series D Preferred Stock” and Eighteen Million Two Hundred Seven Thousand Two Hundred Fifty-Seven (18,207,257) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series E Preferred Stock”.”

(Signature page follows)

 

2


IN WITNESS WHEREOF, Berkeley Lights, Inc. has caused this Certificate of Amendment to be signed by Eric Hobbs, a duly authorized officer of the Corporation, on February 21, 2020.

 

/s/ Eric Hobbs

Eric Hobbs
Chief Executive Officer

[Signature page to Certificate of Amendment]

Exhibit 3.2

BERKELEY LIGHTS, INC.

RESTATED CERTIFICATE OF INCORPORATION

(Pursuant to Sections 242 and 245 of the

General Corporation Law of the State of Delaware)

Berkeley Lights, Inc., a corporation organized and existing under and by virtue of the provisions of the General Corporation Law of the State of Delaware (the “General Corporation Law”), does hereby certify as follows.

1. The name of this corporation is Berkeley Lights, Inc. This corporation was originally incorporated pursuant to the General Corporation Law on April 5, 2011 under the name Berkeley Lights, Inc.

2. The Board of Directors of this corporation duly adopted resolutions proposing to amend and restate the Certificate of Incorporation of this corporation, declaring said amendment and restatement to be advisable and in the best interests of this corporation, which resolution setting forth the proposed amendment and restatement is as follows.

RESOLVED, that the Certificate of Incorporation of this corporation be amended and restated in its entirety to read as set forth on Exhibit A attached hereto and incorporated herein by this reference.

Exhibit A referred to in the resolution above is attached hereto as Exhibit A and is hereby incorporated herein by this reference.

3. This Restated Certificate of Incorporation was approved by the holders of the requisite number of shares of this corporation in accordance with Section 228 of the General Corporation Law.

4. This Restated Certificate of Incorporation, which restates and integrates and further amends the provisions of this corporation’s Certificate of Incorporation, has been duly adopted in accordance with Sections 242 and 245 of the General Corporation Law.

IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been executed by a duly authorized officer of this corporation on this      day of July, 2020.

 

By:  

 

  Eric Hobbs, President and Chief Executive Officer


EXHIBIT A BERKELEY LIGHTS, INC.

RESTATED CERTIFICATE OF INCORPORATION

ARTICLE I: NAME.

The name of this corporation is Berkeley Lights, Inc. (the “Corporation”).

ARTICLE II: REGISTERED OFFICE.

The address of the registered office of the Corporation in the State of Delaware is 3500 South Dupont Highway, City of Dover, County of Kent, Delaware 19901. The name of its registered agent at such address is Incorporating Services, Ltd.

ARTICLE III: PURPOSE.

The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law.

ARTICLE IV: AUTHORIZED SHARES.

Reverse Stock Split

1. Effective upon the filing of this Amended and Restated Certificate of Incorporation (the “Restated Certificate”) with the Secretary of State of the State of Delaware (the “Effective Time”), each two shares of Common Stock (as defined below) issued and outstanding immediately prior to the Effective Time, shall, automatically and without any further action on the part of any stockholders of the Corporation, be reclassified as one share of Common Stock and each two shares of Series A Preferred Stock, Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock (each, as defined below) issued and outstanding immediately prior to the Effective Time shall, automatically and without any further action on the part of any stockholders of the Corporation, be reclassified as one share of Series A Preferred Stock, Series A-1 Preferred Stock, Series A-2 Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, respectively (the “Reverse Stock Split”).

2. Each stock certificate representing shares of any class or series of Common Stock or Preferred Stock (as defined below) immediately prior to the Effective Time shall, from and after the Effective Time, represent that number of shares of the class or series of Common Stock or Preferred Stock into which such shares shall have been reclassified pursuant to the Reverse Stock Split; provided, however, that each holder of any stock certificate(s) that represented shares of Common Stock or Preferred Stock immediately prior to the Effective Time shall be entitled to receive, upon surrender of such certificate(s), one or more certificates (or book entry shares) evidencing and representing the number of shares of Common Stock or Preferred Stock into which the shares represented by such certificate(s) shall have been reclassified pursuant to the Reverse Stock Split.

 

1


3. No fractional shares shall be issued for shares of Preferred Stock or Common Stock pursuant to the Reverse Stock Split. If the Reverse Stock Split would result in the issuance of any fractional share of any class or series of Common Stock or Preferred Stock, the Corporation shall, in lieu of issuing any such fractional share, pay cash in an amount equal to the fair value of such fractional share (as determined in good faith by the Corporation’s Board of Directors (the “Board”)). All share, per share and dollar references in this Restated Certificate shall be adjusted for the Reverse Stock Split only as explicitly provided herein.

Authorized Capital Stock

The total number of shares of all classes of stock which the Corporation shall have authority to issue is (a) One Hundred Thirty Million Six Hundred Thousand (130,600,000) shares of Common Stock, $0.00005 par value per share (“Common Stock”), and (b) One Hundred One Million Six Hundred Forty-Eight Thousand Six Hundred Fifty Seven (101,648,657) shares of Preferred Stock, $0.00005 par value per share (“Preferred Stock”). As of the Effective Time, Seven Million Three Hundred Twenty Thousand (7,320,000) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock”, Three Million Two (3,000,002) shares of the authorized Preferred Stock of the Corporation are hereby designated “Series A-1 Preferred Stock”, Fourteen Million Forty-Nine Thousand Eight Hundred Seventy-Six (14,049,876) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series A-2 Preferred Stock”, Twenty Seven Million One Hundred Eighty Four Thousand Six Hundred Eighty-Three (27,184,683) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series B Preferred Stock”, Twenty Million (20,000,000) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series C Preferred Stock”, Eleven Million Eight Hundred Eighty-Six Thousand Eight Hundred Thirty-Nine (11,886,839) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series D Preferred Stock” and Eighteen Million Two Hundred Seven Thousand Two Hundred Fifty-Seven (18,207,257) shares of the authorized Preferred Stock of the Corporation are hereby designated as “Series E Preferred Stock”.

The following is a statement of the designations and the rights, powers and preferences, and the qualifications, limitations or restrictions thereof, in respect of each class of capital stock of the Corporation.

 

A.

COMMON STOCK

1. General. The voting, dividend and liquidation rights of the holders of the Common Stock are subject to and qualified by the rights, powers and preferences of the holders of the Preferred Stock set forth herein.

2. Voting. The holders of the Common Stock are entitled to one vote for each share of Common Stock held at all meetings of stockholders (and written actions in lieu of meetings). Unless required by law, there shall be no cumulative voting. The number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by (in addition to any vote of the holders of one or more series of Preferred Stock that may be required by the terms of this Restated Certificate) the affirmative vote of the holders of

 

2


shares of capital stock of the Corporation representing a majority of the votes represented by all outstanding shares of capital stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law and without a separate class vote of the holders of the Common Stock.

 

B.

PREFERRED STOCK

The following rights, powers and preferences, and restrictions, qualifications and limitations, shall apply to the Preferred Stock. Unless otherwise indicated, references to “Sections” in this Part B of this Article IV refer to sections of this Part B.

1. Dividends.

1.1 Non-Cumulative Series E Preferred Stock Dividend Preference. From and after the date of the issuance of any shares of Series E Preferred Stock, the Corporation shall not pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) in any calendar year unless (in addition to the obtaining of any consents required elsewhere in this Restated Certificate) the holders of the Series E Preferred Stock then outstanding shall first receive, or simultaneously receive, out of funds legally available therefor, a dividend on each outstanding share of Series E Preferred Stock in an amount equal to 8% of the Original Issue Price (as defined below) per share of the Series E Preferred Stock. The foregoing dividends shall not be cumulative and shall be paid when, as and if declared by the Board. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series E Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series E Preferred Stock in an amount at least equal to the greater of (i) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series E Preferred Stock as would equal the product of (A) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (B) the number of shares of Common Stock issuable upon conversion of a share of Series E Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (ii) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series E Preferred Stock determined by (A) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (B) multiplying such fraction by an amount equal to the Series E Original Issue Price (as defined below); provided that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series E Preferred Stock pursuant to this Section 1.1 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series E Preferred Stock dividend.

 

3


1.2 Cumulative Series D Preferred Stock Dividend Preference. From and after the date of the issuance of any shares of Series D Preferred Stock, dividends at the rate per annum of $0.54 per share shall accrue on such shares of Series D Preferred Stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series D Preferred Stock) (the “Accruing Dividends”). Accruing Dividends shall accrue from day to day, whether or not declared, and shall be cumulative; provided, however, that except as set forth in the following sentence of this Section 1.2 or in Section 2.1, such Accruing Dividends shall be payable (i) after payment or declaration and setting apart of the dividends in the full preferential amount specified in Section 1.1 above for the Series E Preferred Stock, and (ii) only when, as, and if declared by the Board and the Corporation shall be under no obligation to pay such Accruing Dividends. The Corporation shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) unless (in addition to the obtaining of any consents required elsewhere in the Certificate of Incorporation) the holders of the Series D Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series D Preferred Stock in an amount at least equal to the greater of (i) the amount of the aggregate Accruing Dividends then accrued on such share of Series D Preferred Stock and not previously paid and (ii) (A) in the case of a dividend on Common Stock or any class or series that is convertible into Common Stock, that dividend per share of Series D Preferred Stock as would equal the product of (1) the dividend payable on each share of such class or series determined, if applicable, as if all shares of such class or series had been converted into Common Stock and (2) the number of shares of Common Stock issuable upon conversion of a share of Series D Preferred Stock, in each case calculated on the record date for determination of holders entitled to receive such dividend or (B) in the case of a dividend on any class or series that is not convertible into Common Stock, at a rate per share of Series D Preferred Stock determined by (1) dividing the amount of the dividend payable on each share of such class or series of capital stock by the original issuance price of such class or series of capital stock (subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to such class or series) and (2) multiplying such fraction by an amount equal to the Series D Original Issue Price (as defined below); provided that if the Corporation declares, pays or sets aside, on the same date, a dividend on shares of more than one class or series of capital stock of the Corporation, the dividend payable to the holders of Series D Preferred Stock pursuant to this Section 1.2 shall be calculated based upon the dividend on the class or series of capital stock that would result in the highest Series D Preferred Stock dividend.

1.3 Non-Cumulative Prior Senior Preferred Stock Dividend Preference. After payment or declaration and setting apart of the dividends in the full preferential amount specified in Section 1.1 and Section 1.2 above for the Series E Preferred Stock and the Series D Preferred Stock, respectively, the holders of shares of Series B Preferred Stock and Series C Preferred Stock (collectively, the “Prior Senior Preferred Stock”) shall be entitled to receive dividends, out of any assets legally available therefor, prior and in preference to any declaration or payment of any dividend (other than dividends on shares of Common Stock payable in shares of Common Stock) on the Series A Preferred Stock, Series A-1 Preferred Stock and Series A-2 Preferred Stock (collectively, the “Junior Preferred Stock”) and the Common Stock of the Corporation, in an amount equal to 8% of the Original Issue Price (as defined below) per share of such Prior Senior Preferred Stock. The foregoing dividends shall not be cumulative and shall be paid when, as and if declared by the Board.

 

4


1.4 Non-Cumulative Junior Preferred Stock Dividend Preference. After payment or declaration and setting apart of the dividends in the full preferential amount specified in Section 1.1, Section 1.2 and Section 1.3 above for the Series E Preferred Stock, the Series D Preferred Stock and the Prior Senior Preferred Stock, respectively, the Corporation shall not pay or set aside any dividends on shares of any other class or series of capital stock of the Corporation (other than dividends on shares of Common Stock payable in shares of Common Stock) in any calendar year unless (in addition to the obtaining of any consents required elsewhere in this Restated Certificate) the holders of the Junior Preferred Stock then outstanding shall first receive, or simultaneously receive, out of funds legally available therefor, a dividend on each outstanding share of Junior Preferred Stock in an amount equal to 8% of the Original Issue Price (as defined below) per share of such Junior Preferred Stock. The foregoing dividends shall not be cumulative and shall be paid when, as and if declared by the Board. As of the Effective Time, the “Original Issue Price” means, (i) for the Series A Preferred Stock, $0.05 per share, (ii) for the Series A-1 Preferred Stock, $0.333333 per share, (iii) for the Series A-2 Preferred Stock, $0.5694 per share, (iv) for the Series B Preferred Stock, $2.146 per share, (v) for the Series C Preferred Stock, $5.86 per share, (vi) for the Series D Preferred Stock, $6.73 per share and (vii) for the Series E Preferred Stock, $10.4354 per share (in each case subject to appropriate adjustment in the event of any stock splits and combinations of shares and for dividends paid on the such series of Preferred Stock in shares of such stock occurring after the Effective Time).

1.5 Participation. If, after dividends in the full preferential amount specified in Section 1.1, Section 1.2, Section 1.3 and Section 1.4 above for the Preferred Stock have been paid or set apart for payment in any calendar year of the Corporation, the Board shall declare additional dividends out of funds legally available therefor in that calendar year, then such additional dividends shall be declared pro rata on the Common Stock and the Preferred Stock on a pari passu basis according to the number of shares of Common Stock held by such holders. For this purpose each holder of shares of Preferred Stock is to be treated as holding the greatest whole number of shares of Common Stock then issuable upon conversion of all shares of Preferred Stock held by such holder pursuant to Sections 4 and 5.

1.6 Non-Cash Dividends. Whenever a dividend provided for in this Section 1 shall be payable in property other than cash, the value of such dividend shall be deemed to be the fair market value of such property as determined in good faith by the Board.

2. Liquidation, Dissolution or Winding Up; Certain Mergers, Consolidations and Asset Sales.

2.1 Payments to Holders of Series E Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), before any payment shall be made to the holders of Series D Preferred Stock, Prior Senior Preferred Stock, Junior Preferred Stock or Common Stock by reason of their ownership thereof, the holders of shares of Series E Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such Series E Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such Series E Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up

 

5


or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Series E Preferred Stock the full amounts to which they are entitled under this Section 2.1, the holders of shares of Series E Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Series E Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.2 Payments to Holders of Series D Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), after the payment of all preferential amounts required to be paid to the holders of shares of Series E Preferred Stock as provided in Section 2.1 before any payment shall be made to the holders of Prior Senior Preferred Stock, Junior Preferred Stock or Common Stock by reason of their ownership thereof, the holders of shares of Series D Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such Series D Preferred Stock, plus any Accruing Dividends accrued but unpaid thereon, whether or not declared, together with any other dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such Series D Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Series D Preferred Stock the full amounts to which they are entitled under this Section 2.2, the holders of shares of Series D Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Series D Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.3 Payments to Holders of Prior Senior Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation or any Deemed Liquidation Event (as defined below), after the payment of all preferential amounts required to be paid to the holders of shares of Series E Preferred Stock as provided in Section 2.1 and the payment of all preferential amounts required to be paid to the holders of shares of Series D Preferred Stock as provided in Section 2.2 and before any payment shall be made to the holders of Junior Preferred Stock or Common Stock by reason of their ownership thereof, the holders of shares of Prior Senior Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such series of Prior Senior Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such series of Prior Senior Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Prior Senior Preferred Stock the full amounts to which they are entitled under this Section 2.3, the holders of shares of Prior Senior Preferred

 

6


Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Prior Senior Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.4 Payments to Holders of Junior Preferred Stock. In the event of any voluntary or involuntary liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Series E Preferred Stock as provided in Section 2.1, to be paid to the holders of shares of Series D Preferred Stock as provided in Section 2.2 and to the holders of shares of Prior Senior Preferred Stock as provided in Section 2.3, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, the holders of shares of Junior Preferred Stock then outstanding shall be entitled to be paid out of the funds and assets available for distribution to its stockholders, an amount per share equal to the greater of (a) the Original Issue Price for such series of Junior Preferred Stock, plus any dividends declared but unpaid thereon, or (b) such amount per share as would have been payable had all such series of Junior Preferred Stock been converted into Common Stock pursuant to Sections 4 and 5 immediately prior to such liquidation, dissolution, winding up or Deemed Liquidation Event. If upon any such liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, the funds and assets available for distribution to the stockholders of the Corporation shall be insufficient to pay the holders of shares of Junior Preferred Stock the full amounts to which they are entitled under this Section 2.4, the holders of shares of Junior Preferred Stock shall share ratably in any distribution of the funds and assets available for distribution in proportion to the respective amounts that would otherwise be payable in respect of the shares of Junior Preferred Stock held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

2.5 Payments to Holders of Common Stock. In the event of any voluntary or involuntary liquidation, dissolution, winding up or Deemed Liquidation Event of the Corporation, after the payment of all preferential amounts required to be paid to the holders of shares of Preferred Stock as provided in Section 2.1, Section 2.2, Section 2.3 and Section 2.4, the remaining funds and assets available for distribution to the stockholders of the Corporation shall be distributed among the holders of shares of Common Stock, pro rata based on the number of shares of Common Stock held by each such holder.

2.6 Deemed Liquidation Events.

2.6.1 Definition. Each of the following events shall be considered a “Deemed Liquidation Event” unless the holders of at least 60% of the outstanding shares of Preferred Stock (voting together as a single class on an as-converted basis) elect otherwise by written notice sent to the Corporation at least five days prior to the effective date of any such event:

(a) a merger or consolidation (each a “Combination”) in which (i) the Corporation is a constituent party or (ii) a subsidiary of the Corporation is a constituent party and the Corporation issues shares of its capital stock pursuant to such Combination, except any such Combination involving the Corporation or a subsidiary in which the shares of capital stock of the Corporation outstanding immediately prior to such Combination continue to represent, or are converted into or exchanged for equity securities that represent, immediately following such

 

7


Combination, at least a majority, by voting power, of the equity securities of (1) the surviving or resulting party or (2) if the surviving or resulting party is a wholly owned subsidiary of another party immediately following such Combination, the parent of such surviving or resulting party; provided that, for the purpose of this Section 2.6.1, all shares of Common Stock issuable upon exercise of Options (as defined in Section 5 below) outstanding immediately prior to such Combination or upon conversion of Convertible Securities (as defined in Section 5 below) outstanding immediately prior to such Combination shall be deemed to be outstanding immediately prior to such Combination and, if applicable, deemed to be converted or exchanged in such Combination on the same terms as the actual outstanding shares of Common Stock are converted or exchanged; or

(b) the sale, lease, exclusive license, transfer or other disposition, in a single transaction or series of related transactions, by the Corporation or any subsidiary or subsidiaries of the Corporation, that constitutes an effective disposition of all or substantially all the assets of the Corporation and its subsidiaries taken as a whole (or, if substantially all of the assets of the Corporation and its subsidiaries taken as a whole are held by one or more subsidiaries, the sale or disposition (whether by consolidation, merger, conversion or otherwise) of such subsidiaries of the Corporation), except where such sale, lease, exclusive license, transfer or other disposition is made to the Corporation or one or more wholly owned subsidiaries of the Corporation (an “Asset Disposition”).

2.6.2 Allocation of Escrow. In the event of a Deemed Liquidation Event, if any portion of the consideration payable to the stockholders of the Corporation is payable only upon satisfaction of contingencies (the “Additional Consideration”), the definitive agreement or escrow agreement entered into in connection with such Deemed Liquidation Event shall provide that (a) the portion of such consideration that is not Additional Consideration (such portion, the “Initial Consideration”) shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2, 2.3, 2.4 and 2.5 as if the Initial Consideration were the only consideration payable in connection with such Deemed Liquidation Event; and (b) any Additional Consideration which becomes payable to the stockholders of the Corporation upon satisfaction of such contingencies shall be allocated among the holders of capital stock of the Corporation in accordance with Subsections 2.1, 2.2, 2.3, 2.4 and 2.5 after taking into account the previous payment of the Initial Consideration as part of the same transaction. For the purposes of this Subsection 2.6.2, consideration placed into escrow or retained as holdback to be available for satisfaction of indemnification or similar obligations in connection with such Deemed Liquidation Event shall be deemed to be Additional Consideration.

2.6.3 Amount Deemed Paid or Distributed. The funds and assets deemed paid or distributed to the holders of capital stock of the Corporation upon any such Combination or Asset Distribution shall be the cash or the value of the property, rights or securities paid or distributed to such holders by the Corporation or the acquiring person, firm or other entity. If the amount deemed paid or distributed under this Section 2.6.3 is made in property other than in cash, the value of such distribution shall be the fair market value of such property, as determined in good faith by the Board (including at least the Series B Director or one Series C Director); provided, however, that the following shall apply. For securities not subject to investment letters or other similar restrictions on free marketability:

(A) if traded on a securities exchange or the NASDAQ Stock Market, the value shall be deemed to be the average of the closing prices of the securities on such exchange or market over the 30-day period ending three days prior to the closing of such transaction;

 

8


(B) if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid prices over the 30-day period ending three days prior to the closing of such transaction; or

(C) if there is no active public market, the value shall be the fair market value thereof, as determined in good faith by the Board.

The method of valuation of securities subject to investment letters or other similar restrictions on free marketability (other than restrictions arising solely by virtue of a stockholder’s status as an affiliate or former affiliate) shall take into account an appropriate discount (as determined in good faith by the Board) from the market value as determined pursuant to clause (a) above so as to reflect the approximate fair market value thereof.

3. Voting.

3.1 General. On any matter presented to the stockholders of the Corporation for their action or consideration at any meeting of stockholders of the Corporation (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of Common Stock into which the shares of Preferred Stock held by such holder are convertible as of the record date for determining stockholders entitled to vote on such matter. Fractional votes shall not be permitted and any fractional voting rights available on an as-converted basis (after aggregating all shares into which shares of Preferred Stock held by each holder could be converted) shall be rounded to the nearest whole number (with one-half being rounded upward). Except as provided by law or by the other provisions of this Restated Certificate, holders of Preferred Stock shall vote together with the holders of Common Stock as a single class on an as-converted basis, shall have full voting rights and powers equal to the voting rights and powers of the holders of Common Stock, and shall be entitled, notwithstanding any provision hereof, to notice of any stockholders’ meeting in accordance with the Bylaws of the Corporation.

3.2 Election of Directors.

3.2.1 Election. For so long as at least 500,000 shares of Junior Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Junior Preferred Stock in shares of such stock occurring after the Effective Time), the holders of record of the shares of Junior Preferred Stock, voting together as a single class, shall be entitled to elect two (2) directors of the Corporation (each, a “Junior Preferred Director”). For so long as at least 500,000 shares of Series B Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series B Preferred Stock in shares of such stock occurring after the Effective Time), the holders of record of the shares of Series B Preferred Stock, voting together as a single class, shall be entitled to elect one (1) director of the Corporation (the “Series B Director”). For

 

9


so long as at least 500,000 shares of Series C Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series C Preferred Stock in shares of such stock occurring after the Effective Time), the holders of record of the shares of Series C Preferred Stock, voting together as a single class, shall be entitled to elect two (2) directors of the Corporation (each, a “Series C Director”). For so long as at least 500,000 shares of Series E Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Series E Preferred Stock in shares of such stock occurring after the Effective Time), the holders of record of the shares of Series E Preferred Stock, voting together as a single class, shall be entitled to elect one (1) director of the Corporation (the “Series E Director”). The holders of record of the shares of Common Stock, voting together as a single class, shall be entitled to elect one (1) director of the Corporation (the “Common Director”). The holders of record of the shares of Common Stock and of every other class or series of voting stock (including the Preferred Stock), voting together as a single class on an as-converted basis, shall be entitled to elect the remaining number of directors of the Corporation (each, a “Remaining Director”).

3.2.2 Vacancies Not Caused by Removal. Any vacancy in the office of any director may be filled by the stockholders as specified in this Section 3.2 or by at least a majority of the members of the Board then in office, although less than a quorum, or by a sole remaining member of the Board then in office, even if such directors or such sole remaining director were not elected by the holders of the class, classes or series that are entitled to elect a director or directors to office under the provisions of Section 3.2.1 (the “Specified Stock”) and such electing director or directors shall specify at the time of such election the specific vacant directorship being filled.

3.2.3 Vacancies Caused by Removal. Any director elected as provided in the preceding paragraphs may be removed without cause by, and any vacancy in the office of any such removed director may be filled by, and only by, the affirmative vote of the holders of the shares of the Specified Stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders.

3.2.4 Procedure. At any meeting held for the purpose of electing a director, the presence in person or by proxy of the holders of a majority of the outstanding shares of the Specified Stock entitled to elect such director shall constitute a quorum for the purpose of electing such director and the candidate or candidates to be elected by such Specified Stock shall be those who receive the highest number of affirmative votes (on an as-converted basis) of the outstanding shares of such Specified Stock; provided however that in the case of Series B Preferred Stock, the affirmative vote of the holders of at least 60% of the Series B Preferred Stock shall be required. In the case of an action taken by written consent without a meeting, the candidate or candidates to be elected by such Specified Stock shall be those who are elected by the written consent of the holders of a majority of such Specified Stock; provided however that in the case of Series B Preferred Stock, the written consent of the holders of at least 60% of the Series B Preferred Stock shall be required.

3.3 Preferred Stock Protective Provisions. At any time when at least 500,000 shares of Preferred Stock remain outstanding (as such number is adjusted for stock splits and

 

10


combinations of shares and for dividends paid on the Preferred Stock in shares of such stock occurring after the Effective Time), the Corporation shall not, either directly or indirectly by amendment, merger, consolidation or otherwise, do any of the following without (in addition to any other vote required by law or this Restated Certificate) the written consent, or affirmative vote at a meeting and evidenced in writing, of the holders of at least 60% of the then outstanding shares of Preferred Stock, consenting or voting together as a single class on an as-converted basis:

(a) alter or change the rights, powers or preferences of the Preferred Stock (or any series thereof) set forth in the certificate of incorporation of the Corporation;

(b) increase or decrease the authorized number of shares of Common Stock or Preferred Stock (or any series thereof);

(c) authorize or create (by reclassification or otherwise) any new class or series of capital stock having rights, powers or preferences set forth in the certificate of incorporation of the Corporation, as then in effect, that are senior to or on a parity with any series of Preferred Stock or authorize or create (by reclassification or otherwise) any security convertible into or exercisable for any such new class or series of capital stock;

(d) redeem or repurchase any shares of Common Stock or Preferred Stock, other than (i) pursuant to an agreement with an employee, consultant, director or other service provider to the Corporation or any of its wholly owned subsidiaries (collectively, “Service Providers”) giving the Corporation the right to repurchase shares at the original cost thereof upon the termination of services, (ii) an exercise of a right of first refusal in favor of the Corporation pursuant to an agreement with any Service Provider, which exercise has been approved by the Board;

(e) declare or pay any dividend or otherwise make a distribution to holders of Preferred Stock or Common Stock, other than a dividend on the Common Stock payable in shares of Common Stock;

(f) liquidate, dissolve or wind-up the business and affairs of the Corporation, effect any Deemed Liquidation Event, or consent, agree or commit to any of the foregoing without conditioning such consent, agreement or commitment upon obtaining the approval required by this Section 3.3;

(g) increase or decrease the authorized number of directors constituting the Board;

(h) otherwise amend, alter, restate, or repeal any provision of the certificate of incorporation or the bylaws of the Corporation, as then in effect; or

(i) (i) create, issue, offer, sell, distribute or sponsor any Tokens, whether or not for consideration, including through any agreement for future Tokens, instrument convertible or exercisable into Tokens or any other Token pre-sale or derivative agreement, (ii) develop a software protocol or network permitting, incentivizing or facilitating the generation, exchange, trade, offer, sale or use of Tokens by protocol or network participants, or (iii) cause or permit any of the Corporation’s subsidiaries, Related Nonprofits, affiliates, officers, directors, key employees, agents or other representatives to take any such actions; where, for the purposes of this provision:

(A) “Tokens” shall mean any cryptocurrency, decentralized application tokens, protocol tokens, blockchain-based tokens, assets or other cryptofinance coins, tokens or similar digital assets; and

 

11


(B) “Related Nonprofits” shall mean any not-for-profit, non-governmental organization or other entity that has no equity holders (including without limitation all trusts), wherever domiciled, (x) for which any of the Corporation, its affiliates or any of its or their officers, directors, key employees or their respective immediate family members or affiliates (“Related Parties”) are controlling voting members; (y) for which any Related Parties serve as officers or directors; or (z) with which the Corporation or any Related Parties have entered into a contractual relationship providing for payments of value or governance rights that are material to either party.

3.4 Series B Preferred Stock Protective Provisions. For so long as 500,000 shares of Series B Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock occurring after the Effective Time), the Corporation shall not, without the approval, by vote or written consent, of the holders of at least 60% of the Series B Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series B Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class; or

(b) increase or decrease the authorized number of shares of Series B Preferred Stock.

3.5 Series C Preferred Stock Protective Provisions. For so long as 500,000 shares of Series C Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock occurring after the Effective Time), the Corporation shall not, without the approval, by vote or written consent, of the holders of at least a majority of the Series C Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series C Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class; or

(b) increase or decrease the authorized number of shares of Series C Preferred Stock.

3.6 Series D Preferred Stock Protective Provisions. For so long as 500,000 shares of Series D Preferred Stock remain outstanding (as such number is adjusted for stock splits

 

12


and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock occurring after the Effective Time), the Corporation shall not (whether undertaken by merger, consolidation, or otherwise), without the approval, by vote or written consent, of the holders of at least a majority of the Series D Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series D Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class;

(b) increase or decrease the authorized number of shares of Series D Preferred Stock;

(c) amend this Section 3.6; or

(d) agree or commit to do, or authorize any of, the foregoing.

3.7 Series E Preferred Stock Protective Provisions. For so long as 500,000 shares of Series E Preferred Stock remain outstanding (as such number is adjusted for stock splits and combinations of shares and for dividends paid on the Preferred Stock in shares of such stock occurring after the Effective Time), the Corporation shall not, without the approval, by vote or written consent, of the holders of at least a majority of the Series E Preferred Stock then outstanding, voting as a separate series:

(a) amend the certificate of incorporation of the Corporation (whether undertaken by merger, consolidation, or otherwise) in a manner that alters or changes the powers, preferences or special rights of the Series E Preferred Stock so as to affect them adversely, but does not so affect the Preferred Stock as a class; or

(b) increase or decrease the authorized number of shares of Series E Preferred Stock.

4. Conversion Rights. The holders of the Preferred Stock shall have conversion rights as follows (the “Conversion Rights”):

4.1 Right to Convert.

4.1.1 Conversion Ratio. Each share of a series of Preferred Stock shall be convertible, at the option of the holder thereof, at any time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing the Original Issue Price for such series of Preferred Stock by the Conversion Price (as defined below) for such series of Preferred Stock in effect at the time of conversion. As of the Effective Time, the “Conversion Price” for each series of Preferred Stock shall initially mean the Original Issue Price for such series of Preferred Stock. Such initial Conversion Price, and the rate at which shares of Preferred Stock may be converted into shares of Common Stock, shall be subject to adjustment as provided in Section 5.

 

13


4.1.2 Notice of Conversion. In order for a holder of Preferred Stock to voluntarily convert shares of Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Preferred Stock (or, if such registered holder alleges that any such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate), at the office of the transfer agent for the Preferred Stock (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent (a “Contingency Event”). Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or such holder’s attorney duly authorized in writing. The close of business on the date of receipt by the transfer agent (or by the Corporation if the Corporation serves as its own transfer agent) of such certificates (or lost certificate affidavit and agreement) and notice (or, if later, the date on which all Contingency Events have occurred) shall be the time of conversion (the “Conversion Time”), and the shares of Common Stock issuable upon conversion of the shares represented by such certificate shall be deemed to be outstanding of record as of such time. The Corporation shall, as soon as practicable after the Conversion Time, (a) issue and deliver to such holder of Preferred Stock, or to such holder’s nominee(s), a certificate or certificates for the number of full shares of Common Stock issuable upon such conversion in accordance with the provisions hereof and a certificate for the number (if any) of the shares of Preferred Stock represented by the surrendered certificate that were not converted into Common Stock, (b) pay in cash such amount as provided in Section 5.7.3 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and (c) pay all declared but unpaid dividends on the shares of Preferred Stock converted.

4.1.3 Effect of Voluntary Conversion. All shares of Preferred Stock that shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares shall immediately cease and terminate at the Conversion Time, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 5.7.3 and to receive payment of any dividends declared but unpaid thereon. Any shares of Preferred Stock so converted shall be retired and cancelled and may not be reissued.

4.2 Mandatory Conversion.

4.2.1 Automatic Conversion. Upon either (a) the closing of the sale of shares of Common Stock to the public in a firm-commitment underwritten public offering pursuant to an effective registration statement under the Securities Act resulting in at least $70,000,000 of gross proceeds to the Corporation, following which the Common Stock will be listed or admitted for trading on the New York Stock Exchange or The Nasdaq Stock Market trading platforms or (b) the date and time, or the occurrence of an event, specified by vote or written consent of the

 

14


holders of at least 60% of the outstanding shares of Preferred Stock at the time of such vote or consent, voting together as a single class on an as-converted basis (the time of such closing or the date and time specified or the time of the event specified in such vote or written consent is referred to herein as the “Mandatory Conversion Time”), (x) all outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the applicable ratio described in Section 4.1.1 as the same may be adjusted from time to time in accordance with this Section 4 and (y) such shares may not be reissued by the Corporation.

4.2.2 Mandatory Conversion Procedural Requirements.

(a) All holders of record of shares of Preferred Stock shall be sent written notice of the Mandatory Conversion Time and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to Sections 4.2.1 and 10. Unless otherwise provided in this Restated Certificate, such notice need not be sent in advance of the occurrence of the Mandatory Conversion Time. Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender such holder’s certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Corporation to indemnify the Corporation against any claim that may be made against the Corporation on account of the alleged loss, theft or destruction of such certificate) to the Corporation at the place designated in such notice, and shall thereafter receive certificates for the number of shares of Common Stock to which such holder is entitled pursuant to this Section 4.2.

(b) If so required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form reasonably satisfactory to the Corporation, duly executed by the registered holder or by such holder’s attorney duly authorized in writing. All rights with respect to the Preferred Stock converted pursuant to this Section 4.2, including the rights, if any, to receive notices and vote (other than as a holder of Common Stock), will terminate at the Mandatory Conversion Time (notwithstanding the failure of the holder or holders thereof to surrender the certificates at or prior to such time), except only the rights of the holders thereof, upon surrender of their certificate or certificates (or lost certificate affidavit and agreement) therefor, to receive the items provided for in the next sentence of this Section 4.2.2(b). As soon as practicable after the Mandatory Conversion Time and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Corporation shall issue and deliver to such holder, or to such holder’s nominee(s), a certificate or certificates for the number of full shares of Common Stock issuable on such conversion in accordance with the provisions hereof, together with cash as provided in Section 5.7.3 in lieu of any fraction of a share of Common Stock otherwise issuable upon such conversion and the payment of any declared but unpaid dividends on the shares of Preferred Stock converted. Such converted Preferred Stock shall be retired and cancelled and may not be reissued as shares of such series, and the Corporation may thereafter take such appropriate action (without the need for stockholder action) as may be necessary to reduce the authorized number of shares of Preferred Stock (and the applicable series thereof) accordingly.

4.3 Termination of Conversion Rights. Subject to Section 4.1.2 in the case of a Contingency Event, in the event of a liquidation, dissolution or winding up of the Corporation or a Deemed Liquidation Event, the Conversion Rights shall terminate at the close of business on the third day preceding the date fixed for the first payment of any funds and assets distributable on such event to the holders of Preferred Stock.

 

15


5. Adjustments to Conversion Price.

5.1 Adjustments for Diluting Issuances.

5.1.1 Special Definitions. For purposes of this Article IV, the following definitions shall apply:

(a) “Option” shall mean any right, option or warrant to subscribe for, purchase or otherwise acquire Common Stock or Convertible Securities from the Corporation.

(b) “Original Issue Date” for a series of Preferred Stock shall mean the date on which the first share of such series of Preferred Stock was issued.

(c) “Convertible Securities” shall mean any evidences of indebtedness, shares or other securities issued by the Corporation that are directly or indirectly convertible into or exchangeable for Common Stock, but excluding Options.

(d) “Additional Shares of Common Stock” with respect to a series of Preferred Stock shall mean all shares of Common Stock issued (or, pursuant to Section 5.1.2 below, deemed to be issued) by the Corporation after the applicable Original Issue Date for such series of Preferred Stock, other than the following shares of Common Stock and shares of Common Stock deemed issued pursuant to the following Options and Convertible Securities (collectively as to all such shares and shares deemed issued, “Exempted Securities”):

(A) shares of Common Stock, Options or Convertible Securities issued as a dividend or distribution on such series of Preferred Stock;

(B) shares of Common Stock, Options or Convertible Securities issued by reason of a dividend, stock split, split-up or other distribution on or subdivision of shares of Common Stock that is covered by Section 5.2, 5.3, 5.4, 5.5 or 5.6;

(C) up to 12,628,348 (or such greater number as may be approved from time to time by the Board (including at least the Series B Director or one Series C Director) shares (after giving effect to the Reverse Stock Split) of Common Stock or Options to acquire shares of Common Stock, including but not limited to stock appreciation rights payable in shares of Common Stock or in Options or Convertible Securities, issued to Service Providers for the primary purpose of soliciting or retaining their services pursuant to a plan, agreement or arrangement approved by the Board, calculated from the Corporation’s inception, net of any repurchases of any such shares by the Corporation, net of any such expired or terminated Options or Convertible Securities and proportionally adjusted to reflect any subsequent adjustment pursuant to Sections 5.2 and 5.3;

(D) shares of Common Stock or Convertible Securities actually issued upon the exercise of Options, or shares of Common Stock actually issued upon the conversion or exchange of Convertible Securities, in each case provided that such issuance is pursuant to the terms of such Option or Convertible Security;

 

16


(E) shares of Common Stock, Options or Convertible Securities issued to banks, equipment lessors or other financial institutions pursuant to a debt financing or equipment leasing transaction approved by the Board;

(F) shares of Common Stock, Options or Convertible Securities issued pursuant to a bona fide acquisition of another entity by the Corporation by merger or consolidation with, purchase of substantially all of the assets of, or purchase of more than fifty percent of the outstanding equity securities of, the other entity, or issued pursuant to a bona fide joint venture agreement, provided, that such issuances are approved by the Board;

(G) shares of Common Stock, Options or Convertible Securities issued in connection with sponsored research, collaboration, technology license, development, OEM, marketing or other similar agreements or strategic partnerships approved by the Board;

(H) shares of Common Stock, Options or Convertible Securities issued as a result of a decrease in the Conversion Price of any series of Preferred Stock resulting from the operation of Section 5.1.3;

(I) shares of Common Stock issued in an offering to the public pursuant to a registration statement filed under the Securities Act of 1933, as amended (the “Securities Act”) with, and declared effective by, the Securities and Exchange Commission; or

(J) the issuance or deemed issuance of Common Stock if the Corporation receives written notice from the holders of at least 60% of the then outstanding shares of Preferred Stock, on an as-converted basis, agreeing that no adjustment shall be made as a result of the issuance or deemed issuance.

5.1.2 Deemed Issue of Additional Shares of Common Stock.

(a) If the Corporation at any time or from time to time after the applicable Original Issue Date for a series of Preferred Stock shall issue any Options or Convertible Securities (excluding Options or Convertible Securities which are themselves Exempted Securities) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability (including the passage of time) but without regard to any provision contained therein for a subsequent adjustment of such number including by way of anti-dilution adjustment) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, the conversion or exchange of such Convertible Securities, shall be deemed to be Additional Shares of Common Stock issued as of the time of such issue or, in case such a record date shall have been fixed, as of the close of business on such record date.

 

17


(b) If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any such Option or Convertible Security or (ii) any increase or decrease in the consideration payable to the Corporation upon such exercise, conversion and/or exchange, then, effective upon such increase or decrease becoming effective, the Conversion Price of such series of Preferred Stock computed upon the original issue of such Option or Convertible Security (or upon the occurrence of a record date with respect thereto) shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security. Notwithstanding the foregoing, no readjustment pursuant to this Section 5.1.2(b) shall have the effect of increasing the Conversion Price of a series of Preferred Stock to an amount which exceeds the lower of (1) the Conversion Price for such series of Preferred Stock in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (2) the Conversion Price for such series of Preferred Stock that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.

(c) If the terms of any Option or Convertible Security (excluding Options or Convertible Securities that are themselves Exempted Securities), the issuance of which did not result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3 (either because the consideration per share (determined pursuant to Section 5.1.4) of the Additional Shares of Common Stock subject thereto was equal to or greater than the Conversion Price of such series of Preferred Stock then in effect, or because such Option or Convertible Security was issued before the Original Issue Date of such series of Preferred Stock), are revised after the Original Issue Date of such series of Preferred Stock as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (i) any increase in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (ii) any decrease in the consideration payable to the Corporation upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 5.1.2(a)) shall be deemed to have been issued effective upon such increase or decrease becoming effective.

(d) Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) that resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.3, the Conversion Price of such series of Preferred Stock shall be readjusted to such Conversion Price of such series of Preferred Stock as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.

 

18


(e) If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the Conversion Price of a series of Preferred Stock provided for in this Section 5.1.2 shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in Sections 5.1.2(b) and 5.1.2(c)). If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Corporation upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to such Conversion Price that would result under the terms of this Section 5.1.2 at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to such Conversion Price that such issuance or amendment took place at the time such calculation can first be made.

5.1.3 Issuance of Additional Shares of Common Stock. In the event the Corporation shall at any time after the applicable Original Issue Date of a series of Preferred Stock issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 5.1.2), without consideration or for a consideration per share less than the Conversion Price for such series of Preferred Stock in effect immediately prior to such issue, then such Conversion Price shall be reduced, concurrently with such issue, to a price (calculated to the nearest one-thousandth of a cent) determined in accordance with the following formula:

CP2 = CP1 * (A + B) ÷ (A + C).

For purposes of the foregoing formula, the following definitions shall apply:

“CP2” shall mean the applicable Conversion Price in effect immediately after such issue or deemed issue of Additional Shares of Common Stock

“CP1” shall mean the applicable Conversion Price in effect immediately prior to such issue or deemed issue of Additional Shares of Common Stock;

“A” shall mean the number of shares of Common Stock outstanding immediately prior to such issue or deemed issue of Additional Shares of Common Stock (treating for this purpose as outstanding all shares of Common Stock issuable upon exercise of Options outstanding immediately prior to such issue or upon conversion or exchange of Convertible Securities (including the Preferred Stock) outstanding (assuming exercise of any outstanding Options therefor) immediately prior to such issue);

 

19


“B” shall mean the number of shares of Common Stock that would have been issued or deemed issued if such Additional Shares of Common Stock had been issued at a price per share equal to CP1 (determined by dividing the aggregate consideration received by the Corporation in respect of such issue by CP1); and

“C” shall mean the number of such Additional Shares of Common Stock actually issued or deemed issued in such transaction.

5.1.4 Determination of Consideration. For purposes of this Section 5.1, the consideration received by the Corporation for the issue or deemed issue of any Additional Shares of Common Stock shall be computed as follows:

(a) Cash and Property: Such consideration shall:

(A) insofar as it consists of cash, be computed at the aggregate amount of cash received by the Corporation, excluding amounts paid or payable for accrued interest;

(B) insofar as it consists of property other than cash, be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board; and

(C) in the event Additional Shares of Common Stock are issued together with other shares or securities or other assets of the Corporation for consideration which covers both, be the proportion of such consideration so received, computed as provided in clauses (i) and (ii) above, as determined in good faith by the Board.

(b) Options and Convertible Securities. The consideration per share received by the Corporation for Additional Shares of Common Stock deemed to have been issued pursuant to Section 5.1.2, relating to Options and Convertible Securities, shall be determined by dividing

(A) the total amount, if any, received or receivable by the Corporation as consideration for the issue of such Options or Convertible Securities, plus the minimum aggregate amount of additional consideration (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such consideration) payable to the Corporation upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities, by

(B) the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.

 

20


5.1.5 Multiple Closing Dates. In the event the Corporation shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the Conversion Price of a series of Preferred Stock pursuant to the terms of Section 5.1.2, then, upon the final such issuance, the Conversion Price of such series of Preferred Stock shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any additional adjustments as a result of any such subsequent issuances within such period that are a part of such transaction or series of related transactions).

5.2 Adjustment for Stock Splits and Combinations. If the Corporation shall at any time or from time to time after the Effective Time effect a subdivision of the outstanding Common Stock, the Conversion Price for such series of Preferred Stock in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding. If the Corporation shall at any time or from time to time after the Original Issue Date for a series of Preferred Stock combine the outstanding shares of Common Stock, the Conversion Price for such series of Preferred Stock in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding. Any adjustment under this section shall become effective at the close of business on the date the subdivision or combination becomes effective.

5.3 Adjustment for Certain Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for a series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable on the Common Stock in additional shares of Common Stock, then and in each such event the Conversion Price for such series of Preferred Stock in effect immediately before such event shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying such Conversion Price then in effect by fraction:

(a) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and

(b) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution.

Notwithstanding the foregoing, (i) if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, such Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter such Conversion Price shall be adjusted pursuant to this section as of the time of actual payment of such dividends or distributions; and (ii) no such adjustment shall be made if the holders of such series of Preferred Stock simultaneously receive a dividend or other distribution of shares of

 

21


Common Stock in a number equal to the number of shares of Common Stock as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

5.4 Adjustments for Other Dividends and Distributions. In the event the Corporation at any time or from time to time after the Original Issue Date for a series of Preferred Stock shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Corporation (other than a distribution of shares of Common Stock in respect of outstanding shares of Common Stock), then and in each such event the holders of such series of Preferred Stock shall receive, simultaneously with the distribution to the holders of Common Stock, a dividend or other distribution of such securities in an amount equal to the amount of such securities as they would have received if all outstanding shares of such series of Preferred Stock had been converted into Common Stock on the date of such event.

5.5 Adjustment for Reclassification, Exchange and Substitution. If, at any time or from time to time after the Original Issue Date for a series of Preferred Stock, the Common Stock issuable upon the conversion of such series of Preferred Stock is changed into the same or a different number of shares of any class or classes of stock of the Corporation, whether by recapitalization, reclassification or otherwise (other than by a stock split or combination, dividend, distribution, merger or consolidation covered by Sections 5.2, 5.3, 5.4 or 5.6 or by Section 2.6 regarding a Deemed Liquidation Event), then in any such event each holder of such series of Preferred Stock shall have the right thereafter to convert such stock into the kind and amount of stock and other securities and property receivable upon such recapitalization, reclassification or other change by holders of the number of shares of Common Stock into which such shares of Preferred Stock could have been converted immediately prior to such recapitalization, reclassification or change.

5.6 Adjustment for Merger or Consolidation. Subject to the provisions of Section 2.6, if there shall occur any consolidation or merger involving the Corporation in which the Common Stock (but not a series of Preferred Stock) is converted into or exchanged for securities, cash or other property (other than a transaction covered by Sections 5.1, 5.3, 5.4 or 5.5), then, following any such consolidation or merger, provision shall be made that each share of such series of Preferred Stock shall thereafter be convertible in lieu of the Common Stock into which it was convertible prior to such event into the kind and amount of securities, cash or other property which a holder of the number of shares of Common Stock of the Corporation issuable upon conversion of one share of such series of Preferred Stock immediately prior to such consolidation or merger would have been entitled to receive pursuant to such transaction; and, in such case, appropriate adjustment (as determined in good faith by the Board) shall be made in the application of the provisions in Section 4 and this Section 5 with respect to the rights and interests thereafter of the holders of such series of Preferred Stock, to the end that the provisions set forth in Section 4 and this Section 5 shall thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of such series of Preferred Stock.

 

22


5.7 General Conversion Provisions.

5.7.1 Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price of a series of Preferred Stock pursuant to this Section 5, the Corporation at its expense shall, as promptly as reasonably practicable but in any event not later than 15 days thereafter, compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of such series of Preferred Stock a certificate setting forth such adjustment or readjustment (including the kind and amount of securities, cash or other property into which such series of Preferred Stock is convertible) and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, as promptly as reasonably practicable after the written request at any time of any holder of any series of Preferred Stock (but in any event not later than 10 days thereafter), furnish or cause to be furnished to such holder a certificate setting forth (a) the Conversion Price of such series of Preferred Stock then in effect and (b) the number of shares of Common Stock and the amount, if any, of other securities, cash or property which then would be received upon the conversion of such series of Preferred Stock.

5.7.2 Reservation of Shares. The Corporation shall at all times while any share of Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued capital stock, for the purpose of effecting the conversion of the Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of the Preferred Stock, the Corporation shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to this Restated Certificate. Before taking any action that would cause an adjustment reducing the Conversion Price of a series of Preferred Stock below the then par value of the shares of Common Stock issuable upon conversion of such series of Preferred Stock, the Corporation will take any corporate action which may, in the opinion of its counsel, be necessary in order that the Corporation may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.

5.7.3 Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of the Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the fair value of a share of Common Stock as determined in good faith by the Board. Whether or not fractional shares would be issuable upon such conversion shall be determined on the basis of the total number of shares of Preferred Stock the holder is at the time converting into Common Stock and the aggregate number of shares of Common Stock issuable upon such conversion.

5.7.4 No Further Adjustment after Conversion. Upon any conversion of shares of Preferred Stock into Common Stock, no adjustment to the Conversion Price of the applicable series of Preferred Stock shall be made with respect to the converted shares for any declared but unpaid dividends on such series of Preferred Stock or on the Common Stock delivered upon conversion.

 

23


6. Redemption. The Preferred Stock is not redeemable at the option of the holder thereof.

7. No Reissuance of Redeemed or Otherwise Acquired Preferred Stock. Any shares of Preferred Stock that are redeemed or otherwise acquired by the Corporation or any of its subsidiaries shall be automatically and immediately retired and shall not be reissued, sold or transferred. Neither the Corporation nor any of its subsidiaries may exercise any voting or other rights, powers and preferences granted to the holders of Preferred Stock following the close of business on the third day preceding the Redemption Date for such shares.

8. Waiver. Any of the rights, powers, preferences and other terms of the Junior Preferred Stock that are set forth herein may be waived on behalf of all holders of the Junior Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Junior Preferred Stock that are then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series B Preferred Stock that are set forth herein may be waived on behalf of all holders of Series B Preferred Stock as a class by the affirmative written consent or vote of the holders of at least 60% of the shares of Series B Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series C Preferred Stock that are set forth herein may be waived on behalf of all holders of Series C Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Series C Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series D Preferred Stock that are set forth herein may be waived on behalf of all holders of Series D Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Series D Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock. Any of the rights, powers, preferences and other terms of Series E Preferred Stock that are set forth herein may be waived on behalf of all holders of Series E Preferred Stock as a class by the affirmative written consent or vote of the holders of at least a majority of the shares of Series E Preferred Stock that is then outstanding, treating any convertible Preferred Stock as-if converted to Common Stock.

9. Notice of Record Date. In the event:

(a) the Corporation shall set a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security; or

(b) of any capital reorganization of the Corporation, any reclassification of the Common Stock of the Corporation, or any Deemed Liquidation Event; or

(c) of the voluntary or involuntary dissolution, liquidation or winding-up of the Corporation,

 

24


then, and in each such case, the Corporation will send or cause to be sent to the holders of the Preferred Stock a notice specifying, as the case may be, (i) the record date for such dividend, distribution or subscription right, and the amount and character of such dividend, distribution or subscription right, or (ii) the effective date on which such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up is proposed to take place, and the time, if any is to be fixed, as of which the holders of record of Common Stock (or such other capital stock or securities at the time issuable upon the conversion of the Preferred Stock) shall be entitled to exchange their shares of Common Stock (or such other capital stock or securities) for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, transfer, dissolution, liquidation or winding-up, and the amount per share and character of such exchange applicable to the Preferred Stock and the Common Stock. Such notice shall be sent (A) at least 20 days prior to the earlier of the record date or effective date for the event specified in such notice or (B) such fewer number of days as may be approved the holders of at least 60% of the outstanding shares of Preferred Stock acting as a single class on an as-converted basis.

10. Notices. Except as otherwise provided herein, any notice required or permitted by the provisions of this Article IV to be given to a holder of shares of Preferred Stock shall be mailed, postage prepaid, to the post office address last shown on the records of the Corporation for such holder, given by the holder to the Corporation for the purpose of notice or given by electronic communication in compliance with the provisions of the General Corporation Law, and shall be deemed sent upon such mailing or electronic transmission. If no such address appears or is given, notice shall be deemed given at the place where the principal executive office of the Corporation is located.

ARTICLE V: PREEMPTIVE RIGHTS.

No stockholder of the Corporation shall have a right to purchase shares of capital stock of the Corporation sold or issued by the Corporation except to the extent that such a right may from time to time be set forth in a written agreement between the Corporation and any stockholder.

ARTICLE VI: STOCK REPURCHASES.

To the extent one or more sections of any other state corporations code setting forth minimum requirements for the Corporation’s retained earnings and/or net assets are applicable to the Corporation’s repurchase of shares of Common Stock, such code sections shall not apply, to the greatest extent permitted by applicable law, in whole or in part with respect to repurchases by the Corporation of its Common Stock from Service Providers pursuant to agreements under which the Corporation has the option to repurchase such shares at cost upon the occurrence of certain events, such as the termination of employment. In the case of any such repurchases, such distributions or dividends by this corporation may be made without regard to the “preferential dividends arrears amount” or any “preferential rights amount,” as such terms may be defined in such other state’s corporations code.

 

25


ARTICLE VII: BYLAW PROVISIONS.

 

A.

AMENDMENT OF BYLAWS. Subject to any additional vote required by the Restated Certificate or Bylaws, in furtherance and not in limitation of the powers conferred by statute, the Board is expressly authorized to make, repeal, alter, amend and rescind any or all of the Bylaws of the Corporation.

 

B.

NUMBER OF DIRECTORS. Subject to any additional vote required by the Restated Certificate, the number of directors of the Corporation shall be determined in the manner set forth in the Bylaws of the Corporation.

 

C.

BALLOT. Elections of directors need not be by written ballot unless the Bylaws of the Corporation shall so provide.

 

D.

MEETINGS AND BOOKS. Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws of the Corporation may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board or in the Bylaws of the Corporation.

ARTICLE VIII: DIRECTOR LIABILITY.

 

A.

LIMITATION. To the fullest extent permitted by law, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the General Corporation Law or any other law of the State of Delaware is amended after approval by the stockholders of this Article VIII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law as so amended. Any repeal or modification of the foregoing provisions of this Article VIII by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of, or increase the liability of any director of the Corporation with respect to any acts or omissions of such director occurring prior to, such repeal or modification.

 

B.

INDEMNIFICATION. To the fullest extent permitted by applicable law, the Corporation is authorized to provide indemnification of (and advancement of expenses to) directors, officers and agents of the Corporation (and any other persons to which General Corporation Law permits the Corporation to provide indemnification) through Bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the General Corporation Law.

 

C.

MODIFICATION. Any amendment, repeal or modification of the foregoing provisions of this Article VIII shall not (a) adversely affect any right or protection of any director, officer or other agent of the Corporation existing at the time of such amendment, repeal or modification or (b) increase the liability of any director of the Corporation with respect to any acts or omissions of such director, officer or agent occurring prior to, such amendment, repeal or modification.

 

26


ARTICLE IX: CREDITOR AND STOCKHOLDER COMPROMISES.

Whenever a compromise or arrangement is proposed between the Corporation and its creditors or any class of them and/or between the Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of the Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Corporation under the provisions of §291 of Title 8 of the General Corporation Law or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under §279 of Title 8 of the General Corporation Law order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of the Corporation as a consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of the Corporation, as the case may be, and also on the Corporation.

ARTICLE X: EXCLUDED OPPORTUNITY.

The Corporation renounces, to the fullest extent permitted by law, any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity. An “Excluded Opportunity” is any matter, transaction or interest that is presented to, or acquired, created or developed by, or which otherwise comes into the possession of, (i) any director of the Corporation who is not an employee of the Corporation or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee, affiliate or agent of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, the persons referred to in clauses (i) and (ii) are “Covered Persons”), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise comes into the possession of, a Covered Person expressly and solely in such Covered Person’s capacity as a director of the Corporation while such Covered Person is performing services in such capacity.

 

27

Exhibit 3.3

BERKELEY LIGHTS, INC.

AMENDED AND RESTATED CERTIFICATE OF INCORPORATION

Berkeley Lights, Inc., a corporation organized and existing under and by virtue of the Delaware General Corporation Law, hereby certifies as follows:

The name of the Corporation is Berkeley Lights, Inc. The original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on April 5, 2011.

The Amended and Restated Certificate of Incorporation in the form of Exhibit A attached hereto has been duly adopted in accordance with the provisions of Sections 242, 245 and 228 of the Delaware General Corporation Law.

The text of the Amended and Restated Certificate of Incorporation as heretofore amended or supplemented is hereby restated and further amended to read in its entirety as set forth in Exhibit A attached hereto. The Amended and Restated Certificate of Incorporation shall be effective as of 9:00 a.m. Eastern Time on [ 🌑 ], 2020.

IN WITNESS WHEREOF, this Amended and Restated Certificate of Incorporation has been signed this [ 🌑 ] day of [ 🌑 ], 2020.

 

BERKELEY LIGHTS, INC.
By:  

 

  Eric Hobbs
  Chief Executive Officer


EXHIBIT A

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

BERKELEY LIGHTS, INC.

ARTICLE I

NAME

The name of the corporation is Berkeley Lights, Inc. (the “Corporation”).

ARTICLE II

REGISTERED OFFICE AND AGENT

The address of the Corporation’s registered office in the State of Delaware is 3500 South Dupont Highway, in the City of Dover, County of Kent, 19901. The name of its registered agent at such address is Incorporating Services, Ltd.

ARTICLE III

PURPOSE AND DURATION

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law. The Corporation is to have a perpetual existence.

ARTICLE IV

CAPITAL STOCK

Section 1. This Corporation is authorized to issue two classes of capital stock which shall be designated, respectively, “Common Stock” and “Preferred Stock.” The total number of shares that the Corporation is authorized to issue is 310,000,000, of which 300,000,000 shares shall be Common Stock and 10,000,000 shares shall be Preferred Stock. The Common Stock shall have a par value of $0.00005 per share and the Preferred Stock shall have a par value of $0.00005 per share. Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any of the Common Stock or Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation with the power to vote thereon irrespective of the provisions of Section 242(b)(2) of the Delaware General Corporation Law or any successor provision thereof, and no vote of the holders of any of the Common Stock or Preferred Stock voting separately as a class shall be required therefor.

Section 2. Shares of Preferred Stock may be issued from time to time in one or more series. The Board of Directors of the Corporation (the “Board of Directors”) is hereby authorized to provide from time to time by resolution or resolutions for the creation and issuance, out of the authorized and unissued shares of Preferred Stock, of one or more series of Preferred Stock by filing a certificate (a “Certificate of Designation”) pursuant to the Delaware General Corporation Law, setting forth such resolution and, with respect to each such series, establishing

 

A-1


the designation of such series and the number of shares to be included in such series and fixing the voting powers (full or limited, or no voting power), preferences and relative, participating, optional or other special rights, and the qualifications, limitations and restrictions thereof, of the shares of each such series. Without limiting the generality of the foregoing, the resolution or resolutions providing for the establishment of any series of Preferred Stock may, to the extent permitted by law, provide that such series shall be superior to, rank equally with or be junior to the Preferred Stock of any other series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may be different from those of any and all other series at any time outstanding. Except as otherwise expressly provided in the resolution or resolutions providing for the establishment of any series of Preferred Stock, no vote of the holders of shares of Preferred Stock or Common Stock shall be a prerequisite to the issuance of any shares of any series of the Preferred Stock so authorized in accordance with this Amended and Restated Certificate of Incorporation. Unless otherwise provided in the Certificate of Designation establishing a series of Preferred Stock, the Board of Directors may, by resolution or resolutions, increase or decrease (but not below the number of shares of such series then outstanding) the number of shares of such series and, if the number of shares of such series shall be so decreased, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.

ARTICLE V

BOARD OF DIRECTORS

For the management of the business and for the conduct of the affairs of the Corporation it is further provided that:

Section 1.

(a) The management of the business and the conduct of the affairs of the Corporation shall be vested in the Board of Directors. The number of directors which shall constitute the whole Board of Directors shall be fixed exclusively by one or more resolutions adopted from time to time by the Board of Directors. Except as otherwise expressly delegated by resolution of the Board of Directors, the Board of Directors shall have the exclusive power and authority to appoint and remove officers of the Corporation.

(b) Other than any directors elected by the separate vote of the holders of one or more series of Preferred Stock, the Board of Directors shall be and is divided into three classes, designated as Class I, Class II and Class III, as nearly equal in number as possible. Directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors. At the first annual meeting of stockholders following the effectiveness of this Amended and Restated Certificate of Incorporation (the “Qualifying Record Date”), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years. At the second annual meeting of stockholders following the Qualifying Record Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years. At the third annual meeting of stockholders following the Qualifying Record Date, the term of office of the Class III directors shall expire and Class III

 

A-2


directors shall be elected for a full term of three years. Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, at each succeeding annual meeting of stockholders, directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.

Notwithstanding the foregoing provisions of this Article V, Section 1(b), each director shall serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

(c) Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, the Board of Directors or any individual director may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then outstanding shares of voting stock of the Corporation with the power to vote at an election of directors (the “Voting Stock”).

(d) Subject to the special rights of the holders of one or more series of Preferred Stock to elect directors, any vacancies on the Board of Directors resulting from death, resignation or removal and any newly created directorships resulting from any increase in the number of directors shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, and except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum, or by a sole remaining director, and shall not be filled by the stockholders. Any director appointed in accordance with the preceding sentence shall hold office for a term that shall coincide with the remaining term of the class to which the director shall have been appointed and until such director’s successor shall have been elected and qualified or until his or her earlier death, resignation or removal.

Section 2.

(a) In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter or repeal Bylaws of the Corporation. In addition to any vote of the holders of any class or series of stock of the Corporation required by applicable law or by this Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the adoption, amendment or repeal of the Bylaws of the Corporation by the stockholders of the Corporation shall require the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all the then-outstanding shares of the Voting Stock, voting together as a single class.

(b) The directors of the Corporation need not be elected by written ballot unless the Bylaws so provide.

 

A-3


ARTICLE VI

STOCKHOLDERS

Section 1. Subject to the special rights of the holders of one or more series of Preferred Stock, any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of the stockholders of the Corporation, and the taking of any action by written consent of the stockholders in lieu of a meeting of the stockholders is specifically denied.

Section 2. Subject to the special rights of the holders of one or more series of Preferred Stock, special meetings of the stockholders of the Corporation may be called, for any purpose or purposes, at any time by the Board of Directors, but such special meetings may not be called by stockholders or any other person or persons.

Section 3. Advance notice of stockholder nominations for the election of directors and of other business proposed to be brought by stockholders before any meeting of the stockholders of the Corporation shall be given in the manner provided in the Bylaws of the Corporation.

ARTICLE VII

LIABILITY AND INDEMNIFICATION

Section 1. To the fullest extent permitted by the Delaware General Corporation Law, as the same exists or as may hereafter be amended, a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the Delaware General Corporation Law is amended after approval by the stockholders of this Article VII to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law as so amended, automatically and without further action, upon the date of such amendment.

Section 2. The Corporation, to the fullest extent permitted by law, shall indemnify and advance expenses to any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was a director or officer of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as a director or officer at the request of the Corporation or any predecessor to the Corporation.

Section 3. The Corporation, to the fullest extent permitted by law, may indemnify and advance expenses to any person made or threatened to be made a party to an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he or she, or his or her testator or intestate, is or was an employee or agent of the Corporation or any predecessor of the Corporation, or serves or served at any other enterprise as an employee or agent at the request of the Corporation or any predecessor to the Corporation.

 

A-4


Section 4. Neither any amendment nor repeal of this Article VII, nor the adoption by amendment of this Amended and Restated Certificate of Incorporation of any provision inconsistent with this Article VII, shall eliminate or reduce the effect of this Article VII in respect of any matter occurring, or any action or proceeding accruing or arising (or that, but for this Article VII, would accrue or arise) prior to such amendment or repeal or adoption of an inconsistent provision.

ARTICLE VIII

EXCLUSIVE FORUM

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, employee or agent of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim against the Corporation arising pursuant to any provision of the Delaware General Corporation Law or this Amended and Restated Certificate of Incorporation or the Bylaws (as either may be amended from time to time) or as to which the Delaware General Corporation Law confers jurisdiction to the Chancery Court, or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine, in each such case subject to said Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein; provided that, if and only if the Chancery Court dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Unless the Corporation consents in writing to the selection of an alternate forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article VIII. Notwithstanding the foregoing, the provisions of this Article VIII shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.

ARTICLE IX

AMENDMENTS

Notwithstanding any other provisions of this Amended and Restated Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any affirmative vote of the holders of any particular class or series of the Voting Stock required by law or by this Amended and Restated Certificate of Incorporation (including any Certificate of Designation in respect of one or more series of Preferred Stock), the affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of all of the then-outstanding shares of the Voting Stock, voting together as a single class, shall be required to alter, amend or repeal Articles V, VI, VII and VIII and this Article IX.

* * * *

 

A-5

Exhibit 3.5

 

 

Amended and Restated Bylaws of

Berkeley Lights, Inc.

(a Delaware corporation)

 

 

 

 


Table of Contents

 

         Page  

Article I - Corporate Offices

     1  

1.1

  Registered Office      1  

1.2

  Other Offices      1  

Article II - Meetings of Stockholders

     1  

2.1

  Place of Meetings      1  

2.2

  Annual Meeting      1  

2.3

  Special Meeting      1  

2.4

  Advance Notice Procedures for Business Brought before a Meeting      2  

2.5

  Advance Notice Procedures for Nominations of Directors      5  

2.6

  Notice of Stockholders’ Meetings      7  

2.7

  Quorum      7  

2.8

  Adjourned Meeting; Notice      8  

2.9

  Conduct of Business      8  

2.10

  Voting      8  

2.11

  Record Date for Stockholder Meetings and Other Purposes      9  

2.12

  Proxies      9  

2.13

  List of Stockholders Entitled to Vote      10  

2.14

  Inspectors of Election      10  

2.15

  Delivery to the Corporation.      11  

Article III - Directors

     11  

3.1

  Powers      11  

3.2

  Number of Directors      11  

3.3

  Election, Qualification and Term of Office of Directors      11  

3.4

  Resignation and Vacancies      11  

3.5

  Place of Meetings; Meetings by Telephone      12  

3.6

  Regular Meetings      12  

3.7

  Special Meetings; Notice      12  

3.8

  Quorum      13  

3.9

  Board Action without a Meeting      13  

3.10

  Fees and Compensation of Directors      13  

Article IV - Committees

     13  

4.1

  Committees of Directors      13  

4.2

  Committee Minutes      14  

4.3

  Meetings and Actions of Committees      14  

4.4

  Subcommittees.      14  

Article V - Officers

     14  

5.1

  Officers      14  

5.2

  Appointment of Officers      15  

5.3

  Subordinate Officers      15  

5.4

  Removal and Resignation of Officers      15  

 

i


TABLE OF CONTENTS

(continued)

Page

 

5.5

  Vacancies in Offices      15  

5.6

  Representation of Shares of Other Corporations      15  

5.7

  Authority and Duties of Officers      15  

5.8

  Compensation.      16  

Article VI - Records

     16  

Article VII - General Matters

     16  

7.1

  Execution of Corporate Contracts and Instruments      16  

7.2

  Stock Certificates      16  

7.3

  Special Designation of Certificates.      17  

7.4

  Lost Certificates      17  

7.5

  Shares Without Certificates      17  

7.6

  Construction; Definitions      17  

7.7

  Dividends      17  

7.8

  Fiscal Year      18  

7.9

  Seal      18  

7.10

  Transfer of Stock      18  

7.11

  Stock Transfer Agreements      18  

7.12

  Registered Stockholders      18  

7.13

  Waiver of Notice      19  

Article VIII - Notice by Electronic Transmission

     19  

8.1

  Delivery of Notice; Notice by Electronic Transmission      19  

Article IX - Indemnification

     20  

9.1

  Indemnification of Directors and Officers      20  

9.2

  Indemnification of Others      20  

9.3

  Prepayment of Expenses      20  

9.4

  Determination; Claim      21  

9.5

  Non-Exclusivity of Rights      21  

9.6

  Insurance      21  

9.7

  Other Indemnification      21  

9.8

  Continuation of Indemnification      21  

9.9

  Amendment or Repeal; Interpretation      21  

Article X - Amendments

     22  

Article XI - Forum Selection

     22  

Article XII - Definitions

     23  

 

ii


Amended and Restated Bylaws of

Berkeley Lights, Inc.

 

 

Article I - Corporate Offices

1.1    Registered Office.

The address of the registered office of Berkeley Lights, Inc. (the “Corporation”) in the State of Delaware, and the name of its registered agent at such address, shall be as set forth in the Corporation’s certificate of incorporation, as the same may be amended and/or restated from time to time (the “Certificate of Incorporation”).

1.2    Other Offices.

The Corporation may have additional offices at any place or places, within or outside the State of Delaware, as the Corporation’s board of directors (the “Board”) may from time to time establish or as the business of the Corporation may require.

Article II - Meetings of Stockholders

2.1    Place of Meetings.

Meetings of stockholders shall be held at any place within or outside the State of Delaware, designated by the Board. The Board may, in its sole discretion, determine that a meeting of stockholders shall not be held at any place, but may instead be held solely by means of remote communication as authorized by Section 211(a)(2) of the General Corporation Law of the State of Delaware (the “DGCL”). In the absence of any such designation or determination, stockholders’ meetings shall be held at the Corporation’s principal executive office.

2.2    Annual Meeting.

The Board shall designate the date and time of the annual meeting. At the annual meeting, directors shall be elected and other proper business properly brought before the meeting in accordance with Section 2.4 of these bylaws may be transacted. The Board may postpone, reschedule or cancel any previously scheduled annual meeting of stockholders.

2.3    Special Meeting.

Special meetings of the stockholders may be called only by such persons and only in such manner as set forth in the Certificate of Incorporation.

No business may be transacted at any special meeting of stockholders other than the business specified in the notice of such meeting. The Board may postpone, reschedule or cancel any previously scheduled special meeting of stockholders.


2.4    Advance Notice Procedures for Business Brought before a Meeting.

(i)    At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an annual meeting, business must be (a) specified in a notice of meeting given by or at the direction of the Board, (b) if not specified in a notice of meeting, otherwise brought before the meeting by the Board or the chairperson of the meeting, or (c) otherwise properly brought before the meeting by a stockholder present in Person who (A)(1) was a stockholder of the Corporation both at the time of giving the notice provided for in this Section 2.4 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.4 or (B) properly made such proposal in accordance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (as so amended and inclusive of such rules and regulations, the “Exchange Act”), which proposal has been included in the proxy statement for the annual meeting. The foregoing clause (c) shall be the exclusive means for a stockholder to propose business to be brought before an annual meeting of the stockholders. The only matters that may be brought before a special meeting are the matters specified in the Corporation’s notice of meeting given by or at the direction of the Person calling the meeting pursuant to the Certificate of Incorporation and Section 2.3 of these bylaws. For purposes of this Section 2.4 and Section 2.5 of these bylaws, “present in Person” shall mean that the stockholder proposing that the business be brought before the annual or special meeting of the Corporation, or, if the proposing stockholder is not an individual, a qualified representative of such proposing stockholder, appear at such annual meeting, and a “qualified representative” of such proposing stockholder shall be, if such proposing stockholder is (x) a general or limited partnership, any general partner or Person who functions as a general partner of the general or limited partnership or who controls the general or limited partnership, (y) a corporation or a limited liability company, any officer or Person who functions as an officer of the corporation or limited liability company or any officer, director, general partner or Person who functions as an officer, director or general partner of any entity ultimately in control of the corporation or limited liability company or (z) a trust, any trustee of such trust. This Section 2.4 shall apply to any business that may be brought before an annual or special meeting of stockholders other than nominations for election to the Board at an annual meeting, which shall be governed by Section 2.5 of these bylaws. Stockholders seeking to nominate Persons for election to the Board must comply with Section 2.5 of these bylaws, and this Section 2.4 shall not be applicable to nominations for election to the Board except as expressly provided in Section 2.5 of these bylaws.

(ii)    Without qualification, for business to be properly brought before an annual meeting by a stockholder, the stockholder must (a) provide Timely Notice (as defined below) thereof in writing and in proper form to the Secretary of the Corporation and (b) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.4. To be timely, a stockholder’s notice must be delivered to, or mailed and received at, the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the one-year anniversary of the preceding year’s annual meeting; provided, however, that if the date of the annual meeting is more than thirty (30) days before or more than sixty (60) days after such anniversary date, notice by the stockholder to be timely must be so delivered, or mailed and received, not later than the ninetieth (90th) day prior to such annual meeting or, if later, the tenth (10th) day following the day on which public disclosure of the date of such annual meeting was first made (such notice within such time periods, “Timely Notice”). In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of Timely Notice as described above.

 

2


(iii)    To be in proper form for purposes of this Section 2.4, a stockholder’s notice to the Secretary shall set forth:

(a)    As to each Proposing Person (as defined below), (A) the name and address of such Proposing Person (including, if applicable, the name and address that appear on the Corporation’s books and records); and (B) the number of shares of each class or series of stock of the Corporation that are, directly or indirectly, owned of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act) by such Proposing Person, except that such Proposing Person shall in all events be deemed to beneficially own any shares of any class or series of stock of the Corporation as to which such Proposing Person has a right to acquire beneficial ownership at any time in the future (the disclosures to be made pursuant to the foregoing clauses (A) and (B) are referred to as “Stockholder Information”);

(b)    As to each Proposing Person, (A) the full notional amount of any securities that, directly or indirectly, underlie any “derivative security” (as such term is defined in Rule 16a-1(c) under the Exchange Act) that constitutes a “call equivalent position” (as such term is defined in Rule 16a-1(b) under the Exchange Act) (“Synthetic Equity Position”) and that is, directly or indirectly, held or maintained by such Proposing Person with respect to any shares of any class or series of stock of the Corporation; provided that, for the purposes of the definition of “Synthetic Equity Position,” the term “derivative security” shall also include any security or instrument that would not otherwise constitute a “derivative security” as a result of any feature that would make any conversion, exercise or similar right or privilege of such security or instrument becoming determinable only at some future date or upon the happening of a future occurrence, in which case the determination of the amount of securities into which such security or instrument would be convertible or exercisable shall be made assuming that such security or instrument is immediately convertible or exercisable at the time of such determination; and, provided, further, that any Proposing Person satisfying the requirements of Rule 13d-1(b)(1) under the Exchange Act (other than a Proposing Person that so satisfies Rule 13d-1(b)(1) under the Exchange Act solely by reason of Rule 13d-1(b)(1)(ii)(E)) shall not be deemed to hold or maintain the notional amount of any securities that underlie a Synthetic Equity Position held by such Proposing Person as a hedge with respect to a bona fide derivatives trade or position of such Proposing Person arising in the ordinary course of such Proposing Person’s business as a derivatives dealer, (B) any rights to dividends on the shares of any class or series of stock of the Corporation owned beneficially by such Proposing Person that are separated or separable from the underlying shares of the Corporation, (C) any material pending or threatened legal proceeding in which such Proposing Person is a party or material participant involving the Corporation or any of its officers or directors, or any affiliate of the Corporation, (D) any other material relationship between such Proposing Person, on the one hand, and the Corporation or any affiliate of the Corporation, on the other hand, (E) any direct or indirect material interest in any material contract or agreement of such Proposing Person with the Corporation or any affiliate of the Corporation (including, in any such case, any employment agreement, collective bargaining agreement or consulting agreement) and (F) any other information relating to such Proposing Person that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies or consents by such Proposing Person in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act (the disclosures to be made pursuant to the foregoing clauses (A) through (F) are referred to as “Disclosable Interests”); provided, however, that Disclosable Interests shall not include any such disclosures with respect to the ordinary course business activities of any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner; and

 

3


(c)    As to each item of business that the stockholder proposes to bring before the annual meeting, (A) a brief description of the business desired to be brought before the annual meeting, the reasons for conducting such business at the annual meeting and any material interest in such business of each Proposing Person, (B) the text of the proposal or business (including the text of any resolutions proposed for consideration), (C) a reasonably detailed description of all agreements, arrangements and understandings (x) between or among any of the Proposing Persons or (y) between or among any Proposing Person and any other Person or entity (including their names) in connection with the proposal of such business by such stockholder and (D) any other information relating to such item of business that would be required to be disclosed in a proxy statement or other filing required to be made in connection with solicitations of proxies in support of the business proposed to be brought before the meeting pursuant to Section 14(a) of the Exchange Act; provided, however, that the disclosures required by this Section 2.4(iii) shall not include any disclosures with respect to any broker, dealer, commercial bank, trust company or other nominee who is a Proposing Person solely as a result of being the stockholder directed to prepare and submit the notice required by these bylaws on behalf of a beneficial owner.

(iv)    For purposes of this Section 2.4, the term “Proposing Person shall mean (a) the stockholder providing the notice of business proposed to be brought before an annual meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the business proposed to be brought before the annual meeting is made, (c) any participant (as defined in paragraphs (a)(ii)-(vi) of Instruction 3 to Item 4 of Schedule 14A) with such stockholder in such solicitation or (d) any associate (within the meaning of Rule 12b-2 under the Exchange Act for the purposes of these bylaws) of such stockholder, beneficial owner or any other participant.

(v)    A Proposing Person shall update and supplement its notice to the Corporation of its intent to propose business at an annual meeting, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.4 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(vi)    Notwithstanding anything in these bylaws to the contrary, no business shall be conducted at an annual meeting that is not properly brought before the meeting in accordance with this Section 2.4. The presiding officer of the meeting shall, if the facts warrant, determine that the business was not properly brought before the meeting in accordance with this Section 2.4, and if he or she should so determine, he or she shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.

(vii)    In addition to the requirements of this Section 2.4 with respect to any business proposed to be brought before an annual meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such business. Nothing in this Section 2.4 shall be deemed to affect the rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

 

4


(viii)    For purposes of these bylaws, “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

2.5    Advance Notice Procedures for Nominations of Directors.

(i)    Nominations of any Person for election to the Board at an annual meeting may be made at such meeting only (a) by or at the direction of the Board, including by any committee or Persons authorized to do so by the Board or these bylaws, or (b) by a stockholder present in Person (as defined in Section 2.4) (1) who was a beneficial owner of shares of the Corporation both at the time of giving the notice provided for in this Section 2.5 and at the time of the meeting, (2) is entitled to vote at the meeting and (3) has complied with this Section 2.5 as to such notice and nomination. The foregoing clause (b) shall be the exclusive means for a stockholder to make any nomination of a Person or Persons for election to the Board at any annual meeting of stockholders.

(ii)    Without qualification, for a stockholder to make any nomination of a Person or Persons for election to the Board at an annual meeting, the stockholder must (a) provide Timely Notice (as defined in Section 2.4(ii) of these bylaws) thereof in writing and in proper form to the Secretary of the Corporation, (b) provide the information, agreements and questionnaires with respect to such stockholder and its candidate for nomination as required to be set forth by this Section 2.5, and (c) provide any updates or supplements to such notice at the times and in the forms required by this Section 2.5. In no event shall any adjournment or postponement of an annual meeting or the announcement thereof commence a new time period for the giving of a stockholder’s notice as described above.

(iii)    To be in proper form for purposes of this Section 2.5, a stockholder’s notice to the Secretary shall set forth:

(a)    As to each Nominating Person (as defined below), the Stockholder Information (as defined in Section 2.4(iii)(a) of these bylaws) except that for purposes of this Section 2.5, the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(a);

(b)    As to each Nominating Person, any Disclosable Interests (as defined in Section 2.4(iii)(b), except that for purposes of this Section 2.5 the term “Nominating Person” shall be substituted for the term “Proposing Person” in all places it appears in Section 2.4(iii)(b) and the disclosure with respect to the business to be brought before the meeting in Section 2.4(iii)(c) shall be made with respect to nomination of each Person for election as a director at the meeting); and

(c)    As to each candidate whom a Nominating Person proposes to nominate for election as a director, (A) all information with respect to such candidate for nomination that would be required to be set forth in a stockholder’s notice pursuant to this Section 2.5 if such candidate for nomination were a Nominating Person, (B) all information relating to such candidate for nomination that is required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors in a

 

5


contested election pursuant to Section 14(a) under the Exchange Act (including such candidate’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected), (C) a description of any direct or indirect material interest in any material contract or agreement between or among any Nominating Person, on the one hand, and each candidate for nomination or his or her respective associates or any other participants in such solicitation, on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 under Regulation S-K if such Nominating Person were the “registrant” for purposes of such rule and the candidate for nomination were a director or executive officer of such registrant (the disclosures to be made pursuant to the foregoing clauses (A) through (C) are referred to as “Nominee Information”), and (D) a completed and signed questionnaire, representation and agreement as provided in Section 2.5(vi).

(iv)    For purposes of this Section 2.5, the term “Nominating Person shall mean (a) the stockholder providing the notice of the nomination proposed to be made at the meeting, (b) the beneficial owner or beneficial owners, if different, on whose behalf the notice of the nomination proposed to be made at the meeting is made, (c) any other participant in such solicitation and (d) any associate of such stockholder or beneficial owner or any other participant in such solicitation.

(v)    A stockholder providing notice of any nomination proposed to be made at a meeting shall further update and supplement such notice, if necessary, so that the information provided or required to be provided in such notice pursuant to this Section 2.5 shall be true and correct as of the record date for notice of the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to, or mailed and received by, the Secretary at the principal executive offices of the Corporation not later than five (5) business days after the record date for notice of the meeting (in the case of the update and supplement required to be made as of such record date), and not later than eight (8) business days prior to the date for the meeting or, if practicable, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of ten (10) business days prior to the meeting or any adjournment or postponement thereof).

(vi)    To be eligible to be a candidate for election as a director of the Corporation at an annual meeting, a candidate must be nominated in the manner prescribed in this Section 2.5 and the candidate for nomination, whether nominated by the Board or by a stockholder of record, must have previously delivered (in accordance with the time period prescribed for delivery in a notice to such candidate given by or on behalf of the Board), to the Secretary at the principal executive offices of the Corporation, (a) a completed written questionnaire (in the form provided by the Corporation) with respect to the background, qualifications, stock ownership and independence of such candidate for nomination and (b) a written representation and agreement (in the form provided by the Corporation) that such candidate for nomination (A) is not, and will not become a party to, any agreement, arrangement or understanding with any Person or entity other than the Corporation with respect to any direct or indirect compensation or reimbursement for service as a director of the Corporation that has not been disclosed therein and (B) if elected as a director of the Corporation, will comply with all applicable corporate governance, conflict of interest, confidentiality, stock ownership and trading and other policies and guidelines of the Corporation applicable to all directors and in effect during such Person’s term in office as a director (and, if requested by any candidate for nomination, the Secretary of the Corporation shall provide to such candidate for nomination all such policies and guidelines then in effect).

 

6


(vii)    The Board may also require any proposed candidate for nomination as a Director to furnish such other information as may reasonably be requested by the Board in writing prior to the meeting of stockholders at which such candidate’s nomination is to be acted upon in order for the Board to determine the eligibility of such candidate for nomination to be an independent director of the Corporation.

(viii)    In addition to the requirements of this Section 2.5 with respect to any nomination proposed to be made at a meeting, each Proposing Person shall comply with all applicable requirements of the Exchange Act with respect to any such nominations.

(ix)    No candidate shall be eligible for nomination as a director of the Corporation unless such candidate for nomination and the Nominating Person seeking to place such candidate’s name in nomination has complied with this Section 2.5, as applicable. The presiding officer at the meeting shall, if the facts warrant, determine that a nomination was not properly made in accordance with this Section 2.5, and if he or she should so determine, he or she shall so declare such determination to the meeting, the defective nomination shall be disregarded and any ballots cast for the candidate in question (but in the case of any form of ballot listing other qualified nominees, only the ballots case for the nominee in question) shall be void and of no force or effect.

(x)    Notwithstanding anything in these bylaws to the contrary, no candidate for nomination shall be eligible to be seated as a director of the Corporation unless nominated and elected in accordance with this Section 2.5.

2.6    Notice of Stockholders Meetings.

Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the notice of any meeting of stockholders shall be sent or otherwise given in accordance with Section 8.1 of these bylaws not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting. The notice shall specify the place, if any, date and time of the meeting, the means of remote communication, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.

2.7    Quorum.

Unless otherwise provided by law, the Certificate of Incorporation or these bylaws, the holders of a majority in voting power of the stock issued and outstanding and entitled to vote, present in person, or by remote communication, if applicable, or represented by proxy, shall constitute a quorum for the transaction of business at all meetings of the stockholders. A quorum, once established at a meeting, shall not be broken by the withdrawal of enough votes to leave less than a quorum. If, however, a quorum is not present or represented at any meeting of the stockholders, then either (i) the person presiding over the meeting or (ii) a majority in voting power of the stockholders entitled to vote at the meeting, present in person, or by remote communication, if applicable, or represented by proxy, shall have power to recess the meeting or adjourn the meeting from time to time in the manner provided in Section 2.8 of these bylaws until a quorum is present or represented. At any recessed or adjourned meeting at which a quorum is present or represented, any business may be transacted that might have been transacted at the meeting as originally noticed.

 

7


2.8    Adjourned Meeting; Notice.

When a meeting is adjourned to another time or place, unless these bylaws otherwise require, notice need not be given of the adjourned meeting if the time, place, if any, thereof, and the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such adjourned meeting are announced at the meeting at which the adjournment is taken. At any adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such meeting as of the record date so fixed for notice of such adjourned meeting.

2.9    Conduct of Business.

The date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting shall be announced at the meeting by the person presiding over the meeting. The Board may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board, the person presiding over any meeting of stockholders shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures (which need not be in writing) and to do all such acts as, in the judgment of such presiding person, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board or prescribed by the person presiding over the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present (including, without limitation, rules and procedures for removal of disruptive persons from the meeting); (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the person presiding over the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. The presiding person at any meeting of stockholders, in addition to making any other determinations that may be appropriate to the conduct of the meeting (including, without limitation, determinations with respect to the administration and/or interpretation of any of the rules, regulations or procedures of the meeting, whether adopted by the Board or prescribed by the person presiding over the meeting), shall, if the facts warrant, determine and declare to the meeting that a matter of business was not properly brought before the meeting and if such presiding person should so determine, such presiding person shall so declare to the meeting and any such matter or business not properly brought before the meeting shall not be transacted or considered. Unless and to the extent determined by the Board or the person presiding over the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

2.10    Voting.

Except as may be otherwise provided in the Certificate of Incorporation, these bylaws or the DGCL, each stockholder shall be entitled to one (1) vote for each share of capital stock held by such stockholder.

 

8


Except as otherwise provided by the Certificate of Incorporation, at all duly called or convened meetings of stockholders at which a quorum is present, for the election of directors, a plurality of the votes cast shall be sufficient to elect a director. Except as otherwise provided by the Certificate of Incorporation, these bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or applicable law or pursuant to any regulation applicable to the Corporation or its securities, each other matter presented to the stockholders at a duly called or convened meeting at which a quorum is present shall be decided by the affirmative vote of the holders of a majority in voting power of the votes cast (excluding abstentions and broker non-votes) on such matter.

2.11    Record Date for Stockholder Meetings and Other Purposes.

In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, unless otherwise required by law, not be more than sixty (60) days nor less than ten (10) days before the date of such meeting. If the Board so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is first given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting; and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of capital stock, or for the purposes of any other lawful action, the Board may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

2.12    Proxies.

Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for such stockholder by proxy authorized by an instrument in writing or by a transmission permitted by law filed in accordance with the procedure established for the meeting, but no such proxy shall be voted or acted upon after three (3) years from its date, unless the proxy provides for a longer period. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Section 212 of the DGCL. A proxy may be in the form of an electronic transmission which sets forth or is submitted with information from which it can be determined that the transmission was authorized by the stockholder.

 

9


2.13    List of Stockholders Entitled to Vote.

The Corporation shall prepare, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, that if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting: (i) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (ii) during ordinary business hours, at the Corporation’s principal executive office. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then the list shall be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Such list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 2.13 or to vote in person or by proxy at any meeting of stockholders.

2.14    Inspectors of Election.

Before any meeting of stockholders, the Corporation shall appoint an inspector or inspectors of election to act at the meeting or its adjournment and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If any person appointed as inspector or any alternate fails to appear or fails or refuses to act, then the person presiding over the meeting shall appoint a Person to fill that vacancy.

Such inspectors shall:

(i)    determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting and the validity of any proxies and ballots;

(ii)    count all votes or ballots;

(iii)    count and tabulate all votes;

(iv)    determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspector(s); and

(v)    certify its or their determination of the number of shares represented at the meeting and its or their count of all votes and ballots.

 

10


Each inspector, before entering upon the discharge of the duties of inspector, shall take and sign an oath faithfully to execute the duties of inspection with strict impartiality and according to the best of such inspector’s ability. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. The inspectors of election may appoint such persons to assist them in performing their duties as they determine.

2.15    Delivery to the Corporation.

Whenever this Article II requires one or more persons (including a record or beneficial owner of stock) to deliver a document or information to the Corporation or any officer, employee or agent thereof (including any notice, request, questionnaire, revocation, representation or other document or agreement), such document or information shall be in writing exclusively (and not in an electronic transmission) and shall be delivered exclusively by hand (including, without limitation, overnight courier service) or by certified or registered mail, return receipt requested, and the Corporation shall not be required to accept delivery of any document not in such written form or so delivered. For the avoidance of doubt, the Corporation expressly opts out of Section 116 of the DGCL with respect to the delivery of information and documents to the Corporation required by this Article II.

Article III - Directors

3.1    Powers.

Except as otherwise provided by the Certificate of Incorporation or the DGCL, the business and affairs of the Corporation shall be managed by or under the direction of the Board.

3.2    Number of Directors.

Subject to the Certificate of Incorporation, the total number of directors constituting the Board shall be determined from time to time by resolution of the Board. No reduction of the authorized number of directors shall have the effect of removing any director before that director’s term of office expires.

3.3    Election, Qualification and Term of Office of Directors.

Except as provided in Section 3.4 of these bylaws, and subject to the Certificate of Incorporation, each director, including a director elected to fill a vacancy or newly created directorship, shall hold office until the expiration of the term of the class, if any, for which elected and until such director’s successor is elected and qualified or until such director’s earlier death, resignation, disqualification or removal. Directors need not be stockholders. The Certificate of Incorporation or these bylaws may prescribe qualifications for directors.

3.4    Resignation and Vacancies.

Any director may resign at any time upon notice given in writing or by electronic transmission to the Corporation. The resignation shall take effect at the time specified therein or upon the happening of an event specified therein, and if no time or event is specified, at the time of its receipt. When one or more directors so resigns and the resignation is effective at a future date or upon the happening of an event to occur on a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office as provided in Section 3.3.

 

11


Unless otherwise provided in the Certificate of Incorporation or these bylaws, vacancies resulting from the death, resignation, disqualification or removal of any director, and newly created directorships resulting from any increase in the authorized number of directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.

3.5    Place of Meetings; Meetings by Telephone.

The Board may hold meetings, both regular and special, either within or outside the State of Delaware.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, members of the Board, or any committee designated by the Board, may participate in a meeting of the Board, or any committee, by means of conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting pursuant to this bylaw shall constitute presence in person at the meeting.

3.6    Regular Meetings.

Regular meetings of the Board may be held within or outside the State of Delaware and at such time and at such place as which has been designated by the Board and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other means of electronic transmission. No further notice shall be required for regular meetings of the Board.

3.7    Special Meetings; Notice.

Special meetings of the Board for any purpose or purposes may be called at any time by the chairperson of the Board, the Chief Executive Officer, the President, the Secretary or a majority of the total number of directors constituting the Board.

Notice of the time and place of special meetings shall be:

(i)    delivered personally by hand, by courier or by telephone;

(ii)    sent by United States first-class mail, postage prepaid;

(iii)    sent by facsimile or electronic mail; or

(iv)    sent by other means of electronic transmission,

directed to each director at that director’s address, telephone number, facsimile number or electronic mail address, or other address for electronic transmission, as the case may be, as shown on the Corporation’s records.

If the notice is (i) delivered personally by hand, by courier or by telephone, (ii) sent by facsimile or electronic mail, or (iii) sent by other means of electronic transmission, it shall be delivered or sent at least twenty-four (24) hours before the time of the holding of the meeting. If the notice is sent by U.S. mail, it shall

 

12


be deposited in the U.S. mail at least four (4) days before the time of the holding of the meeting. The notice need not specify the place of the meeting (if the meeting is to be held at the Corporation’s principal executive office) nor the purpose of the meeting.

3.8    Quorum.

At all meetings of the Board, unless otherwise provided by the Certificate of Incorporation, a majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board, except as may be otherwise specifically provided by statute, the Certificate of Incorporation or these bylaws. If a quorum is not present at any meeting of the Board, then the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present.

3.9    Board Action without a Meeting.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission. After an action is taken, the consent or consents relating thereto shall be filed with the minutes of the proceedings of the Board, or the committee thereof, in the same paper or electronic form as the minutes are maintained. Such action by written consent or consent by electronic transmission shall have the same force and effect as a unanimous vote of the Board.

3.10    Fees and Compensation of Directors.

Unless otherwise restricted by the Certificate of Incorporation or these bylaws, the Board shall have the authority to fix the compensation, including fees and reimbursement of expenses, of directors for services to the Corporation in any capacity.

Article IV - Committees

4.1    Committees of Directors.

The Board may designate one (1) or more committees, each committee to consist, of one (1) or more of the directors of the Corporation. The Board may designate one (1) or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board or in these bylaws, shall have and may exercise all the powers and authority of the Board in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers that may require it; but no such committee shall have the power or authority to (i) approve or adopt, or recommend to the stockholders, any action or matter expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopt, amend or repeal any bylaw of the Corporation.

 

13


4.2    Committee Minutes.

Each committee shall keep regular minutes of its meetings and report the same to the Board when required.

4.3    Meetings and Actions of Committees.

Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of:

(i)    Section 3.5 (place of meetings; meetings by telephone);

(ii)    Section 3.6 (regular meetings);

(iii)    Section 3.7 (special meetings; notice);

(iv)    Section 3.9 (board action without a meeting); and

(v)    Section 7.13 (waiver of notice),

with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the Board and its members. However:

(i)    the time of regular meetings of committees may be determined either by resolution of the Board or by resolution of the committee;

(ii)    special meetings of committees may also be called by resolution of the Board or the chairperson of the applicable committee; and

(iii)    the Board may adopt rules for the governance of any committee to override the provisions that would otherwise apply to the committee pursuant to this Section 4.3, provided that such rules do not violate the provisions of the Certificate of Incorporation or applicable law.

4.4    Subcommittees.

Unless otherwise provided in the Certificate of Incorporation, these bylaws or the resolutions of the Board designating the committee, a committee may create one (1) or more subcommittees, each subcommittee to consist of one (1) or more members of the committee, and delegate to a subcommittee any or all of the powers and authority of the committee.

Article V - Officers

5.1    Officers.

The officers of the Corporation shall include a President and a Secretary. The Corporation may also have, at the discretion of the Board, a Chairperson of the Board, a Vice Chairperson of the Board, a Chief Executive Officer, a Chief Financial Officer, a Treasurer, one (1) or more Vice Presidents, one (1) or more Assistant Vice Presidents, one (1) or more Assistant Treasurers, one (1) or more Assistant Secretaries, and any such other officers as may be appointed in accordance with the provisions of these bylaws. Any number of offices may be held by the same person. No officer need be a stockholder or director of the Corporation.

 

14


5.2    Appointment of Officers.

The Board shall appoint the officers of the Corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws.

5.3    Subordinate Officers.

The Board may appoint, or empower the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President, to appoint, such other officers and agents as the business of the Corporation may require. Each of such officers and agents shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the Board may from time to time determine.

5.4    Removal and Resignation of Officers.

Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the Board or, except in the case of an officer chosen by the Board, by any officer upon whom such power of removal may be conferred by the Board.

Any officer may resign at any time by giving written notice to the Corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice. Unless otherwise specified in the notice of resignation, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the Corporation under any contract to which the officer is a party.

5.5    Vacancies in Offices.

Any vacancy occurring in any office of the Corporation shall be filled by the Board or as provided in Section 5.2.

5.6    Representation of Shares of Other Corporations.

The Chairperson of the Board, the Chief Executive Officer, or the President of this Corporation, or any other person authorized by the Board, the Chief Executive Officer or the President, is authorized to vote, represent and exercise on behalf of this Corporation all rights incident to any and all shares or voting securities of any other corporation or other person standing in the name of this Corporation. The authority granted herein may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.

5.7    Authority and Duties of Officers.

All officers of the Corporation shall respectively have such authority and perform such duties in the management of the business of the Corporation as may be provided herein or designated from time to time by the Board and, to the extent not so provided, as generally pertain to their respective offices, subject to the control of the Board.

 

15


5.8    Compensation.

The compensation of the officers of the Corporation for their services as such shall be fixed from time to time by or at the direction of the Board. An officer of the Corporation shall not be prevented from receiving compensation by reason of the fact that he or she is also a director of the Corporation.

Article VI - Records

A stock ledger consisting of one or more records in which the names of all of the Corporation’s stockholders of record, the address and number of shares registered in the name of each such stockholder, and all issuances and transfers of stock of the corporation are recorded in accordance with Section 224 of the DGCL shall be administered by or on behalf of the Corporation. Any records administered by or on behalf of the Corporation in the regular course of its business, including its stock ledger, books of account and minute books, may be kept on, or by means of, or be in the form of, any information storage device, or method, or one or more electronic networks or databases (including one or more distributed electronic networks or databases), provided that the records so kept can be converted into clearly legible paper form within a reasonable time and, with respect to the stock ledger, that the records so kept (i) can be used to prepare the list of stockholders specified in Sections 219 and 220 of the DGCL, (ii) record the information specified in Sections 156, 159, 217(a) and 218 of the DGCL, and (iii) record transfers of stock as governed by Article 8 of the Uniform Commercial Code as adopted in the State of Delaware.    

Article VII - General Matters

7.1    Execution of Corporate Contracts and Instruments.

The Board, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the Corporation; such authority may be general or confined to specific instances.

7.2    Stock Certificates.

The shares of the Corporation shall be represented by certificates, provided that the Board by resolution may provide that some or all of the shares of any class or series of stock of the Corporation shall be uncertificated. Certificates for the shares of stock, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law. Every holder of stock represented by a certificate shall be entitled to have a certificate signed by, or in the name of the Corporation by, any two officers authorized to sign stock certificates representing the number of shares registered in certificate form. The Chairperson or Vice Chairperson of the Board, Chief Executive Officer, the President, Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of the Corporation shall be specifically authorized to sign stock certificates. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.

The Corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to

 

16


represent any such partly paid shares, or upon the books and records of the Corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the Corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.

7.3    Special Designation of Certificates.

If the Corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or on the back of the certificate that the Corporation shall issue to represent such class or series of stock (or, in the case of uncertificated shares, set forth in a notice provided pursuant to Section 151 of the DGCL); provided, however, that except as otherwise provided in Section 202 of the DGCL, in lieu of the foregoing requirements, there may be set forth on the face of back of the certificate that the Corporation shall issue to represent such class or series of stock (or, in the case of any uncertificated shares, included in the aforementioned notice) a statement that the Corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.

7.4    Lost Certificates.

Except as provided in this Section 7.4, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the Corporation and cancelled at the same time. The Corporation may issue a new certificate of stock or uncertificated shares in the place of any certificate theretofore issued by it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or destroyed certificate, or such owner’s legal representative, to give the Corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.

7.5    Shares Without Certificates

The Corporation may adopt a system of issuance, recordation and transfer of its shares of stock by electronic or other means not involving the issuance of certificates, provided the use of such system by the Corporation is permitted in accordance with applicable law.

7.6    Construction; Definitions.

Unless the context requires otherwise, the general provisions, rules of construction and definitions in the DGCL shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural and the plural number includes the singular.

7.7    Dividends.

The Board, subject to any restrictions contained in either (i) the DGCL or (ii) the Certificate of Incorporation, may declare and pay dividends upon the shares of its capital stock. Dividends may be paid in cash, in property or in shares of the Corporation’s capital stock.

 

17


The Board may set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and may abolish any such reserve. Such purposes shall include but not be limited to equalizing dividends, repairing or maintaining any property of the Corporation, and meeting contingencies.

7.8     Fiscal Year.

The fiscal year of the Corporation shall be fixed by resolution of the Board and may be changed by the Board.

7.9     Seal.

The Corporation may adopt a corporate seal, which shall be adopted and which may be altered by the Board. The Corporation may use the corporate seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

7.10     Transfer of Stock.

Shares of the Corporation shall be transferable in the manner prescribed by law and in these bylaws. Shares of stock of the Corporation shall be transferred on the books of the Corporation only by the holder of record thereof or by such holder’s attorney duly authorized in writing, upon surrender to the Corporation of the certificate or certificates representing such shares endorsed by the appropriate person or persons (or by delivery of duly executed instructions with respect to uncertificated shares), with such evidence of the authenticity of such endorsement or execution, transfer, authorization and other matters as the Corporation may reasonably require, and accompanied by all necessary stock transfer stamps. No transfer of stock shall be valid as against the Corporation for any purpose until it shall have been entered in the stock records of the Corporation by an entry showing the names of the persons from and to whom it was transferred.

7.11     Stock Transfer Agreements.

The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes or series of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.

7.12     Registered Stockholders.

The Corporation:

(i)     shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends and to vote as such owner; and

(ii)     shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of another person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Delaware.

 

18


7.13     Waiver of Notice.

Whenever notice is required to be given under any provision of the DGCL, the Certificate of Incorporation or these bylaws, a written waiver, signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission unless so required by the Certificate of Incorporation or these bylaws.

Article VIII - Notice by Electronic Transmission

8.1     Delivery of Notice; Notice by Electronic Transmission.

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provisions of the DGCL, the Certificate of Incorporation, or these bylaws may be given in writing directed to the stockholder’s mailing address (or by electronic transmission directed to the stockholder’s electronic mail address, as applicable) as it appears on the records of the Corporation and shall be given (1) if mailed, when the notice is deposited in the U.S. mail, postage prepaid, (2) if delivered by courier service, the earlier of when the notice is received or left at such stockholder’s address or (3) if given by electronic mail, when directed to such stockholder’s electronic mail address unless the stockholder has notified the Corporation in writing or by electronic transmission of an objection to receiving notice by electronic mail. A notice by electronic mail must include a prominent legend that the communication is an important notice regarding the Corporation.

Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the DGCL, the Certificate of Incorporation or these bylaws shall be effective if given by a form of electronic transmission consented to by the stockholder to whom the notice is given. Any such consent shall be revocable by the stockholder by written notice or electronic transmission to the Corporation. Notwithstanding the provisions of this paragraph, the Corporation may give a notice by electronic mail in accordance with the first paragraph of this section without obtaining the consent required by this paragraph.

Any notice given pursuant to the preceding paragraph shall be deemed given:

(i)     if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice;

(ii)     if by a posting on an electronic network together with separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice; and

(iii)     if by any other form of electronic transmission, when directed to the stockholder.

 

19


Notwithstanding the foregoing, a notice may not be given by an electronic transmission from and after the time that (1) the Corporation is unable to deliver by such electronic transmission two (2) consecutive notices given by the Corporation and (2) such inability becomes known to the Secretary or an Assistant Secretary of the Corporation or to the transfer agent, or other person responsible for the giving of notice, provided, however, the inadvertent failure to discover such inability shall not invalidate any meeting or other action.

An affidavit of the Secretary or an Assistant Secretary or of the transfer agent or other agent of the Corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein.

Article IX - Indemnification

9.1     Indemnification of Directors and Officers.

The Corporation shall indemnify and hold harmless, to the fullest extent permitted by the DGCL as it presently exists or may hereafter be amended, any director or officer of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”) by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership (a “covered person”), joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement) reasonably incurred by such person in connection with any such Proceeding. Notwithstanding the preceding sentence, except as otherwise provided in Section 9.4, the Corporation shall be required to indemnify a person in connection with a Proceeding initiated by such person only if the Proceeding was authorized in the specific case by the Board.

9.2     Indemnification of Others.

The Corporation shall have the power to indemnify and hold harmless, to the fullest extent permitted by applicable law as it presently exists or may hereafter be amended, any employee or agent of the Corporation who was or is made or is threatened to be made a party or is otherwise involved in any Proceeding by reason of the fact that he or she, or a person for whom he or she is the legal representative, is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or non-profit entity, including service with respect to employee benefit plans, against all liability and loss suffered and expenses reasonably incurred by such person in connection with any such Proceeding.

9.3     Prepayment of Expenses.

The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by any covered person, and may pay the expenses incurred by any employee or agent of the Corporation, in defending any Proceeding in advance of its final disposition; provided, however, that such payment of expenses in advance of the final disposition of the Proceeding shall be made only upon receipt of an undertaking by the person to repay all amounts advanced if it should be ultimately determined that the person is not entitled to be indemnified under this Article IX or otherwise.

 

20


9.4     Determination; Claim.

If a claim for indemnification (following the final disposition of such Proceeding) under this Article IX is not paid in full within sixty (60) days, or a claim for advancement of expenses under this Article IX is not paid in full within thirty (30) days, after a written claim therefor has been received by the Corporation the claimant may thereafter (but not before) file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by law. In any such action the Corporation shall have the burden of proving that the claimant was not entitled to the requested indemnification or payment of expenses under applicable law.

9.5     Non-Exclusivity of Rights.

The rights conferred on any person by this Article IX shall not be exclusive of any other rights which such person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, these bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

9.6     Insurance.

The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify him or her against such liability under the provisions of the DGCL.

9.7     Other Indemnification.

The Corporation’s obligation, if any, to indemnify or advance expenses to any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person may collect as indemnification or advancement of expenses from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

9.8     Continuation of Indemnification.

The rights to indemnification and to prepayment of expenses provided by, or granted pursuant to, this Article IX shall continue notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the estate, heirs, executors, administrators, legatees and distributees of such person.

9.9     Amendment or Repeal; Interpretation.

The provisions of this Article IX shall constitute a contract between the Corporation, on the one hand, and, on the other hand, each individual who serves or has served as a director or officer of the Corporation (whether before or after the adoption of these bylaws), in consideration of such person’s performance of such services, and pursuant to this Article IX the Corporation intends to be legally bound to each such current or former director or officer of the Corporation. With respect to current and former directors and officers of the Corporation, the rights conferred under this Article IX are present contractual rights and such rights are fully

 

21


vested, and shall be deemed to have vested fully, immediately upon adoption of theses bylaws. With respect to any directors or officers of the Corporation who commence service following adoption of these bylaws, the rights conferred under this provision shall be present contractual rights and such rights shall fully vest, and be deemed to have vested fully, immediately upon such director or officer commencing service as a director or officer of the Corporation. Any repeal or modification of the foregoing provisions of this Article IX shall not adversely affect any right or protection (i) hereunder of any person in respect of any act or omission occurring prior to the time of such repeal or modification or (ii) under any agreement providing for indemnification or advancement of expenses to an officer or director of the Corporation in effect prior to the time of such repeal or modification.

Any reference to an officer of the Corporation in this Article IX shall be deemed to refer exclusively to the Chief Executive Officer, President, and Secretary, or other officer of the Corporation appointed by (x) the Board pursuant to Article V of these bylaws or (y) an officer to whom the Board has delegated the power to appoint officers pursuant to Article V of these bylaws, and any reference to an officer of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be deemed to refer exclusively to an officer appointed by the board of directors (or equivalent governing body) of such other entity pursuant to the certificate of incorporation and bylaws (or equivalent organizational documents) of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise. The fact that any person who is or was an employee of the Corporation or an employee of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise has been given or has used the title of “Vice President” or any other title that could be construed to suggest or imply that such person is or may be an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall not result in such person being constituted as, or being deemed to be, an officer of the Corporation or of such other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise for purposes of this Article IX.

Article X - Amendments

The Board is expressly empowered to adopt, amend or repeal the bylaws of the Corporation. The stockholders also shall have power to adopt, amend or repeal the bylaws of the Corporation; provided, however, that such action by stockholders shall require, in addition to any other vote required by the Certificate of Incorporation or other applicable law, the affirmative vote of the holders of at least two-thirds of the voting power of all the then-outstanding shares of voting stock of the Corporation with the power to vote generally in an election of directors, voting together as a single class.

Article XI - Forum Selection

Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery (the “Chancery Court”) of the State of Delaware (or, in the event that the Chancery Court does not have jurisdiction, the federal district court for the District of Delaware or other state courts of the State of Delaware) shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or stockholder of the Corporation to the Corporation or to the Corporation’s stockholders, (iii) any action arising pursuant to any provision of the DGCL or the Certificate of Incorporation or these bylaws (as either may be amended from time to time) or (iv) any action asserting a claim against the Corporation governed by the internal affairs doctrine. If any action the subject matter of which is

 

22


within the scope of the preceding sentence is filed in a court other than a court located within the State of Delaware (a “Foreign Action”) in the name of any stockholder, such stockholder shall be deemed to have consented to (a) the Personal jurisdiction of the state and federal courts located within the State of Delaware in connection with any action brought in any such court to enforce the preceding sentence and (b) having service of process made upon such stockholder in any such action by service upon such stockholder’s counsel in the Foreign Action as agent for such stockholder.

Unless the Corporation consents in writing to the selection of an alternate forum, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act of 1933, as amended. Any person or entity purchasing or otherwise acquiring any interest in any security of the Corporation shall be deemed to have notice of and consented to this Article XI. Notwithstanding the foregoing, the provisions of this Article XI shall not apply to suits brought to enforce any liability or duty created by the Securities Exchange Act of 1934, as amended, or any other claim for which the federal courts of the United States have exclusive jurisdiction.

Article XII - Definitions

As used in these bylaws, unless the context otherwise requires, the following terms shall have the following meanings:

An “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, including the use of, or participation in, one or more electronic networks or databases (including one or more distributed electronic networks or databases), that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

An “electronic mail” means an electronic transmission directed to a unique electronic mail address (which electronic mail shall be deemed to include any files attached thereto and any information hyperlinked to a website if such electronic mail includes the contact information of an officer or agent of the Corporation who is available to assist with accessing such files and information).

An “electronic mail address” means a destination, commonly expressed as a string of characters, consisting of a unique user name or mailbox (commonly referred to as the “local part” of the address) and a reference to an internet domain (commonly referred to as the “domain part” of the address), whether or not displayed, to which electronic mail can be sent or delivered.

The term “person” means any individual, general partnership, limited partnership, limited liability company, corporation, trust, business trust, joint stock company, joint venture, unincorporated association, cooperative or association or any other legal entity or organization of whatever nature, and shall include any successor (by merger or otherwise) of such entity.

 

23


Berkeley Lights, Inc.

Certificate of Amendment and Restatement of Bylaws

 

 

The undersigned hereby certifies that he is the duly elected, qualified, and acting Secretary of Berkeley Lights, Inc., a Delaware corporation (the “Corporation”), and that the foregoing bylaws were approved on                     , 2020, effective as of                     , 2020 by the Corporation’s board of directors.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this          day of         , 2020.

 

 

Stuart Merkadeau
General Counsel and Secretary

Exhibit 4.2

 

 

LOGO


LOGO

Exhibit 5.1

 

  

140 Scott Drive

  

Menlo Park, California 94025

  

Tel: +1.650.328.4600 Fax: +1.650.463.2600

  

www.lw.com

LOGO

  

 

FIRM / AFFILIATE OFFICES

  

Beijing

 

Moscow

  

Boston

 

Munich

  

Brussels

 

New York

  

Century City

 

Orange County

  

Chicago

 

Paris

  

Dubai

 

Riyadh

July 13, 2020   

Düsseldorf

 

San Diego

  

Frankfurt

 

San Francisco

  

Hamburg

 

Seoul

  

Hong Kong

 

Shanghai

  

Houston

 

Silicon Valley

  

London

 

Singapore

  

Los Angeles

 

Tokyo

  

Madrid

 

Washington, D.C.

  

Milan

 

Berkeley Lights, Inc.

5858 Horton Street, Suite 320

Emeryville, California 94608

 

  Re:

Form S-1 Registration Statement File No. 333-239487

Initial Public Offering of up to 8,510,000 Shares of Common Stock

of Berkeley Lights, Inc.

Ladies and Gentlemen:

We have acted as special counsel to Berkeley Lights, Inc., a Delaware corporation (the “Company”), in connection with the proposed issuance of up to 8,510,000 shares of common stock, $0.00005 par value per share (the “Shares”). The Shares are included in a registration statement on Form S-1 under the Securities Act of 1933, as amended (the “Act”), filed with the Securities and Exchange Commission (the “Commission”) on July 13, 2020 (Registration No. 333-239487) (as amended, the “Registration Statement”). This opinion is being furnished in connection with the requirements of Item 601(b)(5) of Regulation S-K under the Act, and no opinion is expressed herein as to any matter pertaining to the contents of the Registration Statement or related prospectus (the “Prospectus”), other than as expressly stated herein with respect to the issue of the Shares.

As such counsel, we have examined such matters of fact and questions of law as we have considered appropriate for purposes of this letter. With your consent, we have relied upon certificates and other assurances of officers of the Company and others as to factual matters without having independently verified such factual matters. We are opining herein as to the General Corporation Law of the State of Delaware (the “DGCL”), and we express no opinion with respect to any other laws.

Subject to the foregoing and the other matters set forth herein, it is our opinion that, as of the date hereof, when the Shares shall have been duly registered on the books of the transfer agent


July 13, 2020

Page 2

 

LOGO

 

and registrar therefor in the name or on behalf of the purchasers and have been issued by the Company against payment therefor in the circumstances contemplated by the form of underwriting agreement most recently filed as an exhibit to the Registration Statement, the issue and sale of the Shares will have been duly authorized by all necessary corporate action of the Company, and the Shares will be validly issued, fully paid and nonassessable. In rendering the foregoing opinion, we have assumed that the Company will comply with all applicable notice requirements regarding uncertificated shares provided in the DGCL.

This opinion is for your benefit in connection with the Registration Statement and may be relied upon by you and by persons entitled to rely upon it pursuant to the applicable provisions of the Act. We consent to your filing this opinion as an exhibit to the Registration Statement and to the reference to our firm in the Prospectus under the heading “Legal Matters.” In giving such consent, we do not thereby admit that we are in the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission thereunder.

Very truly yours,

/s/ Latham & Watkins LLP

Exhibit 10.2(a)

BERKELEY LIGHTS, INC.

2020 INCENTIVE AWARD PLAN

ARTICLE I.

PURPOSE

The Plan’s purpose is to enhance the Company’s ability to attract, retain and motivate persons who make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities.

ARTICLE II.

DEFINITIONS

As used in the Plan, the following words and phrases have the meanings specified below, unless the context clearly indicates otherwise:

2.1    “Administrator” means the Board or a Committee to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee. With reference to the Board’s or a Committee’s powers or authority under the Plan that have been delegated to one or more officers pursuant to Section 4.2, the term “Administrator” shall refer to such officer(s) unless and until such delegation has been revoked.

2.2    “Applicable Law” means any applicable law, including without limitation: (a) provisions of the Code, the Securities Act, the Exchange Act and any rules or regulations thereunder; (b) corporate, securities, tax or other laws, statutes, rules, requirements or regulations, whether federal, state, local or foreign; and (c) rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.

2.3    “Award” means an Option, Stock Appreciation Right, Restricted Stock award, Restricted Stock Unit award, Performance Bonus Award, Performance Stock Unit award, Dividend Equivalents award or Other Stock or Cash Based Award granted to a Participant under the Plan.

2.4    “Award Agreement” means an agreement evidencing an Award, which may be written or electronic, that contains such terms and conditions as the Administrator determines, consistent with and subject to the terms and conditions of the Plan.

2.5    “Board” means the Board of Directors of the Company.

2.6    “Change in Control” means any of the following:

(a)    A transaction or series of transactions (other than an offering of Common Stock to the general public through a registration statement filed with the Securities and Exchange Commission) whereby any “person” or related “group” of “persons” (as such terms are used in Sections 13(d) and 14(d)(2) of the Exchange Act) directly or indirectly acquires beneficial ownership (within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act) of the Company’s securities possessing more than 50% of the total combined voting power of the Company’s securities outstanding immediately after such acquisition; provided, however, that the following acquisitions shall not constitute a Change in Control: (i) any acquisition by the Company or any of its Subsidiaries; (ii) any acquisition by an employee benefit plan maintained by the Company or any of its Subsidiaries, (iii) any acquisition which complies with Sections 2.6(c)(i), 2.6(c)(ii) and 2.6(c)(iii); or (iv) in respect of an Award held by a particular Participant, any acquisition by the Participant or any group of persons including the Participant (or any entity controlled by the Participant or any group of persons including the Participant);


(b)    The Incumbent Directors cease for any reason to constitute a majority of the Board;

(c)    The consummation by the Company (whether directly involving the Company or indirectly involving the Company through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination, (y) a sale or other disposition of all or substantially all of the Company’s assets in any single transaction or series of related transactions or (z) the acquisition of assets or stock of another entity, in each case other than a transaction:

(i)    which results in the Company’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of the Company or the person that, as a result of the transaction, controls, directly or indirectly, the Company or owns, directly or indirectly, all or substantially all of the Company’s assets or otherwise succeeds to the business of the Company (the Company or such person, the “Successor Entity”)) directly or indirectly, at least a majority of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction;

(ii)    after which no person or group beneficially owns voting securities representing 50% or more of the combined voting power of the Successor Entity; provided, however, that no person or group shall be treated for purposes of this Section 2.6(c)(ii) as beneficially owning 50% or more of the combined voting power of the Successor Entity solely as a result of the voting power held in the Company prior to the consummation of the transaction; and

(iii)    after which at least a majority of the members of the board of directors (or the analogous governing body) of the Successor Entity were Board members at the time of the Board’s approval of the execution of the initial agreement providing for such transaction; or

(d)    The completion of a liquidation or dissolution of the Company.

Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any Award (or any portion of an Award) that provides for the deferral of compensation that is subject to Section 409A, to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b), (c) or (d) of this Section 2.6 with respect to such Award (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such Award if such transaction also constitutes a “change in control event,” as defined in Treasury Regulation Section 1.409A-3(i)(5).

The Administrator shall have full and final authority, which shall be exercised in its sole discretion, to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of such Change in Control and any incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.

2.7    “Code” means the U.S. Internal Revenue Code of 1986, as amended, and all regulations, guidance, compliance programs and other interpretative authority issued thereunder.

2.8    “Committee” means one or more committees or subcommittees of the Board, which may include one or more Company directors or executive officers, to the extent permitted by Applicable Law. To the extent required to comply with the provisions of Rule 16b-3, it is intended that each member of the

 

2


Committee will be, at the time the Committee takes any action with respect to an Award that is subject to Rule 16b-3, a “non-employee director” within the meaning of Rule 16b-3; however, a Committee member’s failure to qualify as a “non-employee director” within the meaning of Rule 16b-3 will not invalidate any Award granted by the Committee that is otherwise validly granted under the Plan.

2.9    “Common Stock” means the common stock of the Company.

2.10    “Company” means Berkeley Lights, Inc., a Delaware corporation, or any successor.

2.11    “Consultant” means any person, including any adviser, engaged by the Company or its parent or Subsidiary to render services to such entity if the consultant or adviser: (i) renders bona fide services to the Company; (ii) renders services not in connection with the offer or sale of securities in a capital-raising transaction and does not directly or indirectly promote or maintain a market for the Company’s securities; and (iii) is a natural person.

2.12    “Designated Beneficiary” means the beneficiary or beneficiaries the Participant designates, in a manner the Company determines, to receive amounts due or exercise the Participant’s rights if the Participant dies. Without a Participant’s effective designation, “Designated Beneficiary” will mean the Participant’s estate.

2.13    “Director” means a Board member.

2.14    “Disability” means a permanent and total disability under Section 22(e)(3) of the Code.

2.15    “Dividend Equivalents” means a right granted to a Participant to receive the equivalent value (in cash or Shares) of dividends paid on a specified number of Shares. Such Dividend Equivalent shall be converted to cash or additional Shares, or a combination of cash and Shares, by such formula and at such time and subject to such limitations as may be determined by the Administrator.

2.16    “DRO” means a “domestic relations order” as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder.

2.17    “Effective Date” has the meaning set forth in Section 11.3.

2.18    “Employee” means any employee of the Company or any of its Subsidiaries.

2.19    “Equity Restructuring” means a nonreciprocal transaction between the Company and its stockholders, such as a stock dividend, stock split (including a reverse stock split), spin-off or recapitalization through a large, nonrecurring cash dividend, that affects the number or kind of Shares (or other Company securities) or the share price of Common Stock (or other Company securities) and causes a change in the per share value of the Common Stock underlying outstanding Awards.

2.20    “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and all regulations, guidance and other interpretative authority issued thereunder.

2.21    “Fair Market Value” means, as of any date, the value of a Share determined as follows: (i) if the Common Stock is listed on any established stock exchange, the value of a Share will be the closing sales price for a Share as quoted on such exchange for such date, or if no sale occurred on such date, the last day preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; (ii) if the Common Stock is not listed on an established stock exchange but is quoted on a national market or other quotation system, the value of a Share will be the

 

3


closing sales price for a Share on such date, or if no sales occurred on such date, then on the last date preceding such date during which a sale occurred, as reported in The Wall Street Journal or another source the Administrator deems reliable; or (iii) if the Common Stock is not listed on any established stock exchange or quoted on a national market or other quotation system, the value established by the Administrator in its sole discretion. Notwithstanding the foregoing, with respect to any Award granted after the effectiveness of the Company’s registration statement relating to its initial public offering and prior to the Public Trading Date, the Fair Market Value means the initial public offering price of a Share as set forth in the Company’s final prospectus relating to its initial public offering filed with the Securities and Exchange Commission.

2.22     “Greater Than 10% Stockholder” means an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any parent corporation or subsidiary corporation of the Company, as determined in accordance with in Section 424(e) and (f) of the Code, respectively.

2.23    “Incentive Stock Option” means an Option that meets the requirements to qualify as an “incentive stock option” as defined in Section 422 of the Code.

2.24    “Incumbent Directors” means, for any period of 12 consecutive months, individuals who, at the beginning of such period, constitute the Board together with any new Director(s) (other than a Director designated by a person who shall have entered into an agreement with the Company to effect a transaction described in Section 2.6(a) or 2.6(c)) whose election or nomination for election to the Board was approved by a vote of at least a majority (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for Director without objection to such nomination) of the Directors then still in office who either were Directors at the beginning of the 12-month period or whose election or nomination for election was previously so approved. No individual initially elected or nominated as a director of the Company as a result of an actual or threatened election contest with respect to Directors or as a result of any other actual or threatened solicitation of proxies by or on behalf of any person other than the Board shall be an Incumbent Director.

2.25     “Nonqualified Stock Option” means an Option that is not an Incentive Stock Option.

2.26    “Option” means a right granted under Article VI to purchase a specified number of Shares at a specified price per Share during a specified time period. An Option may be either an Incentive Stock Option or a Nonqualified Stock Option.

2.27    “Other Stock or Cash Based Awards” means cash awards, awards of Shares, and other awards valued wholly or partially by referring to, or are otherwise based on, Shares or other property.

2.28    “Overall Share Limit” means the sum of (i) 6,750,000 Shares; (ii) any Shares that are subject to Prior Plan Awards that become available for issuance under the Plan pursuant to Article V; and (iii) an annual increase on the first day of each year beginning in 2021 and ending in 2030, equal to the lesser of (A) 4.0% of the Shares outstanding on the last day of the immediately preceding fiscal year and (B) such smaller number of Shares as determined by the Board.

2.29    “Participant” means a Service Provider who has been granted an Award.

2.30    “Performance Bonus Award” has the meaning set forth in Section 8.3.

 

4


2.31    “Performance Stock Unit” means a right granted to a Participant pursuant to Section 8.1 and subject to Section 8.2, to receive Shares, the payment of which is contingent upon achieving certain performance goals or other performance-based targets established by the Administrator.

2.32    “Permitted Transferee” means, with respect to a Participant, any “family member” of the Participant, as defined in the General Instructions to Form S-8 Registration Statement under the Securities Act (or any successor form thereto), or any other transferee specifically approved by the Administrator after taking into account Applicable Law.

2.33    “Plan” means this 2020 Incentive Award Plan.

2.34    “Prior Plan” means the Company’s 2011 Equity Incentive Plan, as amended.

2.35    “Prior Plan Award” means an award outstanding under the Prior Plan as of the Effective Date.

2.36    “Public Trading Date” means the first date upon which Common Stock is listed (or approved for listing) upon notice of issuance on any securities exchange or designated (or approved for designation) upon notice of issuance as a national market security on an interdealer quotation system.

2.37    “Restricted Stock” means Shares awarded to a Participant under Article VII, subject to certain vesting conditions and other restrictions.

2.38    “Restricted Stock Unit” means an unfunded, unsecured right to receive, on the applicable settlement date, one Share or an amount in cash or other consideration determined by the Administrator to be of equal value as of such settlement date, subject to certain vesting conditions and other restrictions.

2.39    “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange Act.

2.40    “Section 409A” means Section 409A of the Code.

2.41    “Securities Act” means the Securities Act of 1933, as amended, and all regulations, guidance and other interpretative authority issued thereunder.

2.42    “Service Provider” means an Employee, Consultant or Director.

2.43    “Shares” means shares of Common Stock.

2.44    “Stock Appreciation Right” or “SAR” means a right granted under Article VI to receive a payment equal to the excess of the Fair Market Value of a specified number of Shares on the date the right is exercised over the exercise price set forth in the applicable Award Agreement.

2.45    “Subsidiary” means any entity (other than the Company), whether domestic or foreign, in an unbroken chain of entities beginning with the Company if each of the entities other than the last entity in the unbroken chain beneficially owns, at the time of the determination, securities or interests representing at least 50% of the total combined voting power of all classes of securities or interests in one of the other entities in such chain.

2.46    “Substitute Awards” means Awards granted or Shares issued by the Company in assumption of, or in substitution or exchange for, awards previously granted, or the right or obligation to make future awards, in each case by a company or other entity acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines.

 

5


2.47    “Termination of Service” means:

(a)    As to a Consultant, the time when the engagement of a Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, without limitation, by resignation, discharge, death or retirement, but excluding terminations where the Consultant simultaneously commences or remains in employment or service with the Company or any Subsidiary.

(b)    As to a Non-Employee Director, the time when a Participant who is a Non-Employee Director ceases to be a Director for any reason, including, without limitation, a termination by resignation, failure to be elected, death or retirement, but excluding terminations where the Participant simultaneously commences or remains in employment or service with the Company or any Subsidiary.

(c)    As to an Employee, the time when the employee-employer relationship between a Participant and the Company or any Subsidiary is terminated for any reason, including, without limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where the Participant simultaneously commences or remains in employment or service with the Company or any Subsidiary.

The Company, in its sole discretion, shall determine the effect of all matters and questions relating to any Termination of Service, including, without limitation, whether a Termination of Service has occurred, whether a Termination of Service resulted from a discharge for “cause” and all questions of whether particular leaves of absence constitute a Termination of Service. For purposes of the Plan, a Participant’s employee-employer relationship or consultancy relationship shall be deemed to be terminated in the event that the Subsidiary employing or contracting with such Participant ceases to remain a Subsidiary following any merger, sale of stock or other corporate transaction or event (including, without limitation, a spin-off), even though the Participant may subsequently continue to perform services for that entity.

ARTICLE III.

ELIGIBILITY

Service Providers are eligible to be granted Awards under the Plan, subject to the limitations described herein. No Service Provider shall have any right to be granted an Award pursuant to the Plan and neither the Company nor the Administrator is obligated to treat Service Providers, Participants or any other persons uniformly.

ARTICLE IV.

ADMINISTRATION AND DELEGATION

4.1    Administration.

(a)    The Plan is administered by the Administrator. The Administrator has authority to determine which Service Providers receive Awards, grant Awards and set Award terms and conditions, subject to the conditions and limitations in the Plan. The Administrator also has the authority to take all actions and make all determinations under the Plan, to interpret the Plan and Award Agreements and to adopt, amend and repeal Plan administrative rules, guidelines and practices as it deems advisable. The Administrator may correct defects and ambiguities, supply omissions, reconcile inconsistencies in the Plan or any Award and make all other determinations that it deems necessary or appropriate to administer the Plan and any Awards. The Administrator (and each member thereof) is entitled to, in good faith, rely or act

 

6


upon any report or other information furnished to it, him or her by any officer or other employee of the Company or any Subsidiary, the Company’s independent certified public accountants, or any executive compensation consultant or other professional retained by the Company to assist in the administration of the Plan. The Administrator’s determinations under the Plan are in its sole discretion and will be final, binding and conclusive on all persons having or claiming any interest in the Plan or any Award.

(b)    Without limiting the foregoing, the Administrator has the exclusive power, authority and sole discretion to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant; (iii) determine the number of Awards to be granted and the number of Shares to which an Award will relate; (iv) subject to the limitations in the Plan, determine the terms and conditions of any Award and related Award Agreement, including, but not limited to, the exercise price, grant price, purchase price, any performance criteria, any restrictions or limitations on the Award, any schedule for vesting, lapse of forfeiture restrictions or restrictions on the exercisability of an Award, and accelerations, waivers or amendments thereof; (v) determine whether, to what extent, and under what circumstances an Award may be settled in, or the exercise price of an Award may be paid in cash, Shares, or other property, or an Award may be canceled, forfeited, or surrendered; and (vi) make all other decisions and determinations that may be required pursuant to the Plan or as the Administrator deems necessary or advisable to administer the Plan.

4.2    Delegation of Authority. To the extent permitted by Applicable Law, the Board or any Committee may delegate any or all of its powers under the Plan to one or more Committees or officers of the Company or any of its Subsidiaries; provided, however, that in no event shall an officer of the Company or any of its Subsidiaries be delegated the authority to grant Awards to, or amend Awards held by, the following individuals: (a) individuals who are subject to Section 16 of the Exchange Act, or (b) officers of the Company or any of its Subsidiaries or Directors to whom authority to grant or amend Awards has been delegated hereunder. Any delegation hereunder shall be subject to the restrictions and limits that the Board or Committee specifies at the time of such delegation or that are otherwise included in the applicable organizational documents, and the Board or Committee, as applicable, may at any time rescind the authority so delegated or appoint a new delegatee. At all times, the delegatee appointed under this Section 4.2 shall serve in such capacity at the pleasure of the Board or the Committee, as applicable, and the Board or the Committee may abolish any committee at any time and re-vest in itself any previously delegated authority. Further, regardless of any delegation, the Board or a Committee may, in its discretion, exercise any and all rights and duties as the Administrator under the Plan delegated thereby, except with respect to Awards that are required to be determined in the sole discretion of the Committee under the rules of any securities exchange or automated quotation system on which the Shares are listed, quoted or traded.

ARTICLE V.

STOCK AVAILABLE FOR AWARDS

5.1    Number of Shares. Subject to adjustment under Article IX and the terms of this Article V, Awards may be made under the Plan covering up to the Overall Share Limit. As of the Effective Date, the Company will cease granting awards under the Prior Plan; however, Prior Plan Awards will remain subject to the terms of the Prior Plan. Shares issued or delivered under the Plan may consist of authorized but unissued Shares, Shares purchased on the open market or treasury Shares.

5.2    Share Recycling.

(a)    If all or any part of an Award or Prior Plan Award expires, lapses or is terminated, converted into an award in respect of shares of another entity in connection with a spin-off or other similar event, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, in any case, in a manner that results in the Company acquiring Shares covered by the Award or

 

7


Prior Plan Award at a price not greater than the price (as adjusted to reflect any Equity Restructuring) paid by the Participant for such Shares or not issuing any Shares covered by the Award or Prior Plan Award, the unused Shares covered by the Award or Prior Plan Award will, as applicable, become or again be available for Awards under the Plan. The payment of Dividend Equivalents in cash in conjunction with any outstanding Awards or Prior Plan Awards shall not count against the Overall Share Limit.

(b)    In addition, the following Shares shall be available for future grants of Awards: (i) Shares tendered by a Participant or withheld by the Company in payment of the exercise price of an Option or any stock option granted under the Prior Plan; (ii) Shares tendered by the Participant or withheld by the Company to satisfy any tax withholding obligation with respect to an Award or any award granted under the Prior Plan; and (iii) Shares subject to a Stock Appreciation Right that are not issued in connection with the stock settlement of the Stock Appreciation Right on exercise thereof. Notwithstanding the provisions of this Section 5.2(b), no Shares may again be optioned, granted or awarded pursuant to an Incentive Stock Option if such action would cause such Option to fail to qualify as an incentive stock option under Section 422 of the Code.

5.3    Incentive Stock Option Limitations. Notwithstanding anything to the contrary herein, no more than 50,000,000 Shares (as adjusted to reflect any Equity Restructuring) may be issued pursuant to the exercise of Incentive Stock Options.

5.4    Substitute Awards. In connection with an entity’s merger or consolidation with the Company or any Subsidiary or the Company’s or any Subsidiary’s acquisition of an entity’s property or stock, the Administrator may grant Awards in substitution for any options or other stock or stock-based awards granted before such merger or consolidation by such entity or its affiliate. Substitute Awards may be granted on such terms and conditions as the Administrator deems appropriate, notwithstanding limitations on Awards in the Plan. Substitute Awards will not count against the Overall Share Limit (nor shall Shares subject to a Substitute Award be added to the Shares available for Awards under the Plan as provided above), except that Shares acquired by exercise of substitute Incentive Stock Options will count against the maximum number of Shares that may be issued pursuant to the exercise of Incentive Stock Options under the Plan. Additionally, in the event that a company acquired by the Company or any Subsidiary or with which the Company or any Subsidiary combines has shares available under a pre-existing plan approved by stockholders and not adopted in contemplation of such acquisition or combination, the shares available for grant pursuant to the terms of such pre-existing plan (as appropriately adjusted to reflect the transaction) may be used for Awards under the Plan and shall not reduce the Shares authorized for grant under the Plan (and Shares subject to such Awards may again become available for Awards under the Plan as provided under Section 5.2 above); provided that Awards using such available shares shall not be made after the date awards or grants could have been made under the terms of the pre-existing plan, absent the acquisition or combination, and shall only be made to individuals who were not employees or directors of the Company or any of its Subsidiaries prior to such acquisition or combination.

5.5     Non-Employee Director Award Limit. Notwithstanding any provision to the contrary in the Plan or in any policy of the Company regarding non-employee director compensation, the sum of the grant date fair value (determined as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, or any successor thereto) of all equity-based Awards and the maximum amount that may become payable pursuant to all cash-based Awards that may be granted to a Service Provider as compensation for services as a Non-Employee Director during any calendar year shall not exceed $1,000,000 for such Service Provider’s first year of service as a Non-Employee Director and $500,000 for each year thereafter.

 

8


ARTICLE VI.

STOCK OPTIONS AND STOCK APPRECIATION RIGHTS

6.1    General. The Administrator may grant Options or Stock Appreciation Rights to one or more Service Providers, subject to such terms and conditions not inconsistent with the Plan as the Administrator shall determine. The Administrator will determine the number of Shares covered by each Option and Stock Appreciation Right, the exercise price of each Option and Stock Appreciation Right and the conditions and limitations applicable to the exercise of each Option and Stock Appreciation Right. A Stock Appreciation Right will entitle the Participant (or other person entitled to exercise the Stock Appreciation Right) to receive from the Company upon exercise of the exercisable portion of the Stock Appreciation Right an amount determined by multiplying the excess, if any, of the Fair Market Value of one Share on the date of exercise over the exercise price per Share of the Stock Appreciation Right by the number of Shares with respect to which the Stock Appreciation Right is exercised, subject to any limitations of the Plan or that the Administrator may impose and payable in cash, Shares valued at Fair Market Value on the date of exercise or a combination of the two as the Administrator may determine or provide in the Award Agreement.

6.2    Exercise Price. The Administrator will establish each Option’s and Stock Appreciation Right’s exercise price and specify the exercise price in the Award Agreement. Subject to Section 6.6, the exercise price will not be less than 100% of the Fair Market Value on the grant date of the Option or Stock Appreciation Right. Notwithstanding the foregoing, in the case of an Option or Stock Appreciation Right that is a Substitute Award, the exercise price per share of the Shares subject to such Option or Stock Appreciation Right, as applicable, may be less than the Fair Market Value per share on the date of grant; provided that the exercise price of any Substitute Award shall be determined in accordance with the applicable requirements of Section 424 and 409A of the Code.

6.3    Duration of Options. Subject to Section 6.6, each Option or Stock Appreciation Right will be exercisable at such times and as specified in the Award Agreement, provided that the term of an Option or Stock Appreciation Right will not exceed ten years; provided, further, that, unless otherwise determined by the Administrator, (a) no portion of an Option or Stock Appreciation Right which is unexercisable at a Participant’s Termination of Service shall thereafter become exercisable and (b) the portion of an Option or Stock Appreciation Right that is unexercisable at a Participant’s Termination of Service shall automatically expire on the date of such Termination of Service. Notwithstanding the foregoing, if the Participant, prior to the end of the term of an Option or Stock Appreciation Right, commits an act of “cause” (as determined by the Administrator), or violates any non-competition, non-solicitation or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company or any of its Subsidiaries, the right to exercise the Option or Stock Appreciation Right, as applicable, may be terminated by the Company and the Company may suspend the Participant’s right to exercise the Option or Stock Appreciation Right when it reasonably believes that the Participant may have participated in any such act or violation.

6.4    Exercise. Options and Stock Appreciation Rights may be exercised by delivering to the Company (or such other person or entity designated by the Administrator) a notice of exercise, in a form and manner the Company approves (which may be written, electronic or telephonic and may contain representations and warranties deemed advisable by the Administrator), signed or authenticated by the person authorized to exercise the Option or Stock Appreciation Right, together with, as applicable, payment in full of (a) the exercise price for the number of Shares for which the Option is exercised in a manner specified in Section 6.5 and (b) all applicable taxes in a manner specified in Section 10.5. The Administrator may, in its discretion, limit exercise with respect to fractional Shares and require that any partial exercise of an Option or Stock Appreciation Right be with respect to a minimum number of Shares.

 

9


6.5    Payment Upon Exercise. The Administrator shall determine the methods by which payment of the exercise price of an Option shall be made, including, without limitation:

(a)    cash, check or wire transfer of immediately available funds; provided that the Company may limit the use of one of the foregoing methods if one or more of the methods below is permitted;

(b)    if there is a public market for Shares at the time of exercise, unless the Company otherwise determines, (A) delivery (including electronically or telephonically to the extent permitted by the Company) of a notice that the Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise of the Option and that the broker has been directed to deliver promptly to the Company funds sufficient to pay the exercise price, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company an amount sufficient to pay the exercise price by cash, wire transfer of immediately available funds or check; provided that such amount is paid to the Company at such time as may be required by the Company;

(c)    to the extent permitted by the Administrator, delivery (either by actual delivery or attestation) of Shares owned by the Participant valued at their Fair Market Value on the date of delivery;

(d)    to the extent permitted by the Administrator, surrendering Shares then issuable upon the Option’s exercise valued at their Fair Market Value on the exercise date;

(e)    to the extent permitted by the Administrator, delivery of a promissory note or any other lawful consideration; or

(f)    to the extent permitted by the Administrator, any combination of the above payment forms.

6.6    Additional Terms of Incentive Stock Options. The Administrator may grant Incentive Stock Options only to employees of the Company, any of its present or future parent or subsidiary corporations, as defined in Sections 424(e) or (f) of the Code, respectively, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code. If an Incentive Stock Option is granted to a Greater Than 10% Stockholder, the exercise price will not be less than 110% of the Fair Market Value on the Option’s grant date, and the term of the Option will not exceed five years. All Incentive Stock Options (and Award Agreements related thereto) will be subject to and construed consistently with Section 422 of the Code. By accepting an Incentive Stock Option, the Participant agrees to give prompt notice to the Company of dispositions or other transfers (other than in connection with a Change in Control) of Shares acquired under the Option made within (a) two years from the grant date of the Option or (b) one year after the transfer of such Shares to the Participant, specifying the date of the disposition or other transfer and the amount the Participant realized, in cash, other property, assumption of indebtedness or other consideration, in such disposition or other transfer. Neither the Company nor the Administrator will be liable to a Participant, or any other party, if an Incentive Stock Option fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code. Any Incentive Stock Option or portion thereof that fails to qualify as an “incentive stock option” under Section 422 of the Code for any reason, including becoming exercisable with respect to Shares having a fair market value exceeding the $100,000 limitation under Treasury Regulation Section 1.422-4, will be a Nonqualified Stock Option.

 

10


ARTICLE VII.

RESTRICTED STOCK; RESTRICTED STOCK UNITS

7.1    General. The Administrator may grant Restricted Stock, or the right to purchase Restricted Stock, to any Service Provider, subject to forfeiture or the Company’s right to repurchase all or part of such shares at their issue price or other stated or formula price from the Participant if conditions the Administrator specifies in the Award Agreement are not satisfied before the end of the applicable restriction period or periods that the Administrator establishes for such Award. In addition, the Administrator may grant Restricted Stock Units, which may be subject to vesting and forfeiture conditions during the applicable restriction period or periods, as set forth in an Award Agreement, to Service Providers. The Administrator shall establish the purchase price, if any, and form of payment for Restricted Stock and Restricted Stock Units; provided, however, that if a purchase price is charged, such purchase price shall be no less than the par value, if any, of the Shares to be purchased, unless otherwise permitted by Applicable Law. In all cases, legal consideration shall be required for each issuance of Restricted Stock and Restricted Stock Units to the extent required by Applicable Law. The Award Agreement for each Restricted Stock and Restricted Stock Unit Award shall set forth the terms and conditions not inconsistent with the Plan as the Administrator shall determine.

7.2    Restricted Stock.

(a)    Stockholder Rights. Unless otherwise determined by the Administrator, each Participant holding shares of Restricted Stock will be entitled to all the rights of a stockholder with respect to such Shares, subject to the restrictions in the Plan and the applicable Award Agreement, including the right to receive all dividends and other distributions paid or made with respect to the Shares to the extent such dividends and other distributions have a record date that is on or after the date on which such Participant becomes the record holder of such Shares; provided, however, that with respect to a share of Restricted Stock subject to restrictions or vesting conditions as described in Section 8.3, except in connection with a spin-off or other similar event as otherwise permitted under Section 9.2, dividends which are paid to Company stockholders prior to the removal of restrictions and satisfaction of vesting conditions shall only be paid to the Participant to the extent that the restrictions are subsequently removed and the vesting conditions are subsequently satisfied and the share of Restricted Stock vests.

(b)    Stock Certificates. The Company may require that the Participant deposit in escrow with the Company (or its designee) any stock certificates issued in respect of shares of Restricted Stock, together with a stock power endorsed in blank.

(c)    Section 83(b) Election. If a Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which such Participant would otherwise be taxable under Section 83(a) of the Code, such Participant shall be required to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service along with proof of the timely filing thereof.

7.3    Restricted Stock Units. The Administrator may provide that settlement of Restricted Stock Units will occur upon or as soon as reasonably practicable after the Restricted Stock Units vest or will instead be deferred, on a mandatory basis or at the Participant’s election, subject to compliance with Applicable Law.

ARTICLE VIII.

OTHER TYPES OF AWARDS

8.1    General. The Administrator may grant Performance Stock Unit awards, Performance Bonus Awards, Dividend Equivalents or Other Stock or Cash Based Awards, to one or more Service Providers, in such amounts and subject to such terms and conditions not inconsistent with the Plan as the Administrator shall determine.

 

11


8.2    Performance Stock Unit Awards. Each Performance Stock Unit award shall be denominated in a number of Shares or in unit equivalents of Shares or units of value (including a dollar value of Shares) and may be linked to any one or more of performance or other specific criteria, including service to the Company or Subsidiaries, determined to be appropriate by the Administrator, in each case on a specified date or dates or over any period or periods determined by the Administrator. In making such determinations, the Administrator may consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the particular Participant.

8.3    Performance Bonus Awards. Each right to receive a bonus granted under this Section 8.3 shall be denominated in the form of cash (but may be payable in cash, stock or a combination thereof) (a “Performance Bonus Award”) and shall be payable upon the attainment of performance goals that are established by the Administrator and relate to one or more of performance or other specific criteria, including service to the Company or Subsidiaries, in each case on a specified date or dates or over any period or periods determined by the Administrator.

8.4    Dividend Equivalents. If the Administrator provides, an Award (other than an Option or Stock Appreciation Right) may provide a Participant with the right to receive Dividend Equivalents. Dividend Equivalents may be paid currently or credited to an account for the Participant, settled in cash or Shares and subject to the same restrictions on transferability and forfeitability as the Award with respect to which the Dividend Equivalents are granted and subject to other terms and conditions as set forth in the Award Agreement. Notwithstanding anything to the contrary herein, Dividend Equivalents with respect to an Award subject to vesting shall either (i) to the extent permitted by Applicable Law, not be paid or credited or (ii) be accumulated and subject to vesting to the same extent as the related Award. All such Dividend Equivalents shall be paid at such time as the Administrator shall specify in the applicable Award Agreement.

8.5    Other Stock or Cash Based Awards. Other Stock or Cash Based Awards may be granted to Participants, including Awards entitling Participants to receive cash or Shares to be delivered in the future and annual or other periodic or long-term cash bonus awards (whether based on specified performance criteria or otherwise), in each case subject to any conditions and limitations in the Plan. Such Other Stock or Cash Based Awards will also be available as a payment form in the settlement of other Awards, as standalone payments and as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock or Cash Based Awards may be paid in Shares, cash or other property, as the Administrator determines. Subject to the provisions of the Plan, the Administrator will determine the terms and conditions of each Other Stock or Cash Based Award, including any purchase price, performance goal(s), transfer restrictions, and vesting conditions, which will be set forth in the applicable Award Agreement. Except in connection with a spin-off or other similar event as otherwise permitted under Article IX, dividends that are paid prior to vesting of any Other Stock or Cash Based Award shall only be paid to the applicable Participant to the extent that the vesting conditions are subsequently satisfied and the Other Stock or Cash Based Award vests.

ARTICLE IX.

ADJUSTMENTS FOR CHANGES IN COMMON STOCK

AND CERTAIN OTHER EVENTS

9.1    Equity Restructuring. In connection with any Equity Restructuring, notwithstanding anything to the contrary in this Article IX the Administrator will equitably adjust the terms of the Plan and

 

12


each outstanding Award as it deems appropriate to reflect the Equity Restructuring, which may include (i) adjusting the number and type of securities subject to each outstanding Award or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article V hereof on the maximum number and kind of shares that may be issued); (ii) adjusting the terms and conditions of (including the grant or exercise price), and the performance goals or other criteria included in, outstanding Awards; and (iii) granting new Awards or making cash payments to Participants. The adjustments provided under this Section 9.1 will be nondiscretionary and final and binding on all interested parties, including the affected Participant and the Company; provided that the Administrator will determine whether an adjustment is equitable.

9.2    Corporate Transactions. In the event of any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), reorganization, merger, consolidation, split-up, spin off, combination, amalgamation, repurchase, recapitalization, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or sale or exchange of Common Stock or other securities of the Company, Change in Control, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, other similar corporate transaction or event, other unusual or nonrecurring transaction or event affecting the Company or its financial statements or any change in any Applicable Law or accounting principles, the Administrator, on such terms and conditions as it deems appropriate, either by the terms of the Award or by action taken prior to the occurrence of such transaction or event (except that action to give effect to a change in Applicable Law or accounting principles may be made within a reasonable period of time after such change) and either automatically or upon the Participant’s request, is hereby authorized to take any one or more of the following actions whenever the Administrator determines that such action is appropriate in order to (x) prevent dilution or enlargement of the benefits or potential benefits intended by the Company to be made available under the Plan or with respect to any Award granted or issued under the Plan, (y) to facilitate such transaction or event or (z) give effect to such changes in Applicable Law or accounting principles:

(a)    To provide for the cancellation of any such Award in exchange for either an amount of cash or other property with a value equal to the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights under the vested portion of such Award, as applicable; provided that, if the amount that could have been obtained upon the exercise or settlement of the vested portion of such Award or realization of the Participant’s rights, in any case, is equal to or less than zero, then the Award may be terminated without payment;

(b)    To provide that such Award shall vest and, to the extent applicable, be exercisable as to all Shares (or other property) covered thereby, notwithstanding anything to the contrary in the Plan or the provisions of such Award;

(c)    To provide that such Award be assumed by the successor or survivor corporation or entity, or a parent or subsidiary thereof, or shall be substituted for by awards covering the stock of the successor or survivor corporation or entity, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and applicable exercise or purchase price, in all cases, as determined by the Administrator;

(d)    To make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards or with respect to which Awards may be granted under the Plan (including, but not limited to, adjustments of the limitations in Article V hereof on the maximum number and kind of shares which may be issued) or in the terms and conditions of (including the grant or exercise price), and the criteria included in, outstanding Awards;

 

13


(e)    To replace such Award with other rights or property selected by the Administrator; or

(f)    To provide that the Award will terminate and cannot vest, be exercised or become payable after the applicable event.

9.3    Change in Control.

(a)    Notwithstanding any other provision of the Plan, in the event of a Change in Control, unless the Administrator elects to (i) terminate an Award in exchange for cash, rights or property, or (ii) cause an Award to become fully exercisable and no longer subject to any forfeiture restrictions prior to the consummation of a Change in Control, pursuant to Section 9.2, (A) such Award (other than any portion subject to performance-based vesting) shall continue in effect or be assumed or an equivalent Award substituted by the successor corporation or a parent or subsidiary of the successor corporation and (B) the portion of such Award subject to performance-based vesting shall be subject to the terms and conditions of the applicable Award Agreement and, in the absence of applicable terms and conditions, the Administrator’s discretion.

(b)    In the event that the successor corporation in a Change in Control refuses to assume or substitute for an Award (other than any portion subject to performance-based vesting), the Administrator shall cause such Award to become fully vested and, if applicable, exercisable immediately prior to the consummation of such transaction and all forfeiture restrictions on such Award to lapse and, to the extent unexercised upon the consummation of such transaction, to terminate in exchange for cash, rights or other property. The Administrator shall notify the Participant of any Award that becomes exercisable pursuant to the preceding sentence that such Award shall be fully exercisable for a period of time as determined by the Administrator (which shall be 15 days if no period of time is determined by the Administrator) from the date of such notice, contingent upon the occurrence of the Change in Control, and such Award shall terminate upon the consummation of the Change in Control in accordance with the preceding sentence.

(c)    For the purposes of this Section 9.3, an Award shall be considered assumed if, following the Change in Control, the Award confers the right to purchase or receive, for each Share subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, or other securities or property) received in the Change in Control by holders of Common Stock for each Share held on the effective date of the transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the Change in Control was not solely common stock of the successor corporation or its parent, the Administrator may, with the consent of the successor corporation, provide for the consideration to be received upon the exercise of the Award, for each Share subject to an Award, to be solely common stock of the successor corporation or its parent equal in fair market value to the per-share consideration received by holders of Common Stock in the Change in Control.

9.4    Administrative Stand Still. In the event of any pending stock dividend, stock split, combination or exchange of shares, merger, consolidation or other distribution (other than normal cash dividends) of Company assets to stockholders, or any other extraordinary transaction or change affecting the Shares or the share price of Common Stock (including any Equity Restructuring or any securities offering or other similar transaction) or for reasons of administrative convenience or to facilitate compliance with any Applicable Law, the Company may refuse to permit the exercise or settlement of one or more Awards for such period of time as the Company may determine to be reasonably appropriate under the circumstances.

 

14


9.5    General. Except as expressly provided in the Plan or the Administrator’s action under the Plan, no Participant will have any rights due to any subdivision or consolidation of Shares of any class, dividend payment, increase or decrease in the number of Shares of any class or dissolution, liquidation, merger, or consolidation of the Company or other corporation. Except as expressly provided with respect to an Equity Restructuring under Section 9.1 above or the Administrator’s action under the Plan, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, will affect, and no adjustment will be made regarding, the number of Shares subject to an Award or the Award’s grant or exercise price. The existence of the Plan, any Award Agreements and the Awards granted hereunder will not affect or restrict in any way the Company’s right or power to make or authorize (i) any adjustment, recapitalization, reorganization or other change in the Company’s capital structure or its business, (ii) any merger, consolidation, spinoff, dissolution or liquidation of the Company or sale of Company assets or (iii) any sale or issuance of securities, including securities with rights superior to those of the Shares or securities convertible into or exchangeable for Shares.

ARTICLE X.

PROVISIONS APPLICABLE TO AWARDS

10.1    Transferability.

(a)    No Award may be sold, assigned, transferred, pledged or otherwise encumbered, either voluntarily or by operation of law, except by will or the laws of descent and distribution, or, subject to the Administrator’s consent, pursuant to a domestic relations order, unless and until such Award has been exercised or the Shares underlying such Award have been issued, and all restrictions applicable to such Shares have lapsed. During the life of a Participant, Awards will be exercisable only by the Participant, unless it has been disposed of pursuant to a domestic relations order. After the death of a Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Award Agreement, be exercised by the Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then-Applicable Law of descent and distribution. References to a Participant, to the extent relevant in the context, will include references to a transferee approved by the Administrator.

(b)    Notwithstanding Section 10.1(a), the Administrator, in its sole discretion, may determine to permit a Participant or a Permitted Transferee of such Participant to transfer an Award other than an Incentive Stock Option (unless such Incentive Stock Option is intended to become a Nonqualified Stock Option) to any one or more Permitted Transferees of such Participant, subject to the following terms and conditions: (i) an Award transferred to a Permitted Transferee shall not be assignable or transferable by the Permitted Transferee other than (A) to another Permitted Transferee of the applicable Participant or (B) by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a domestic relations order; (ii) an Award transferred to a Permitted Transferee shall continue to be subject to all the terms and conditions of the Award as applicable to the original Participant (other than the ability to further transfer the Award to any Person other than another Permitted Transferee of the applicable Participant); (iii) the Participant (or transferring Permitted Transferee) and the receiving Permitted Transferee shall execute any and all documents requested by the Administrator, including, without limitation documents to (A) confirm the status of the transferee as a Permitted Transferee, (B) satisfy any requirements for an exemption for the transfer under Applicable Law and (C) evidence the transfer; and (iv) any transfer of an Award to a Permitted Transferee shall be without consideration, except as required by Applicable Law. In addition, and further notwithstanding Section 10.1(a), the Administrator, in its sole discretion, may determine to permit a Participant to transfer Incentive Stock Options to a trust that constitutes a Permitted Transferee if, under Section 671 of the Code and other Applicable Law, the Participant is considered the sole beneficial owner of the Incentive Stock Option while it is held in the trust.

 

15


(c)    Notwithstanding Section 10.1(a), a Participant may, in the manner determined by the Administrator, designate a Designated Beneficiary. A Designated Beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and any Award Agreement applicable to the Participant and any additional restrictions deemed necessary or appropriate by the Administrator. If the Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than the Participant’s spouse or domestic partner, as applicable, as the Participant’s Designated Beneficiary with respect to more than 50% of the Participant’s interest in the Award shall not be effective without the prior written or electronic consent of the Participant’s spouse or domestic partner. Subject to the foregoing, a beneficiary designation may be changed or revoked by a Participant at any time; provided that the change or revocation is delivered in writing to the Administrator prior to the Participant’s death.

10.2    Documentation. Each Award will be evidenced in an Award Agreement in such form as the Administrator determines in its discretion. Each Award may contain such terms and conditions as are determined by the Administrator in its sole discretion, to the extent not inconsistent with those set forth in the Plan.

10.3    Discretion. Except as the Plan otherwise provides, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award to a Participant need not be identical, and the Administrator need not treat Participants or Awards (or portions thereof) uniformly.

10.4    Changes in Participant’s Status. The Administrator will determine how the disability, death, retirement, authorized leave of absence or any other change or purported change in a Participant’s Service Provider status affects an Award and the extent to which, and the period during which, the Participant, the Participant’s legal representative, conservator, guardian or Designated Beneficiary may exercise rights under the Award, if applicable. Except to the extent otherwise required by law or expressly authorized by the Company or by the Company’s written policy on leaves of absence, no Service credit shall be given for vesting purposes for any period the Participant is on a leave of absence.

10.5    Withholding. Each Participant must pay the Company, or make provision satisfactory to the Administrator for payment of, any taxes required by law to be withheld in connection with such Participant’s Awards by the date of the event creating the tax liability. The Company may deduct an amount sufficient to satisfy such tax obligations from any payment of any kind otherwise due to a Participant. The amount deducted shall be determined by the Company and may be up to, but no greater than, the aggregate amount of such obligations based on the maximum statutory withholding rates in the applicable Participant’s jurisdiction for federal, state, local and foreign income tax and payroll tax purposes that are applicable to such taxable income. Subject to any Company insider trading policy (including blackout periods), Participants may satisfy such tax obligations (i) in cash, by wire transfer of immediately available funds, by check made payable to the order of the Company; provided that the Company may limit the use of one of the foregoing methods if one or more of the exercise methods below is permitted, (ii) to the extent permitted by the Administrator, in whole or in part by delivery of Shares, including Shares delivered by attestation and Shares retained from the Award creating the tax obligation, valued at their Fair Market Value on the date of delivery, (iii) if there is a public market for Shares at the time the tax obligations are satisfied, unless the Administrator otherwise determines, (A) delivery (including electronically or telephonically to the extent permitted by the Company) of a notice that the Participant has placed a market sell order with a broker acceptable to the Company with respect to Shares then issuable upon exercise of the Option and that the broker has been directed to deliver promptly to the Company funds sufficient to satisfy the tax obligations, or (B) the Participant’s delivery to the Company of a copy of irrevocable and unconditional instructions to a broker acceptable to the Company to deliver promptly to the Company an amount sufficient to satisfy the tax withholding by cash, wire transfer of immediately available funds or check; provided that

 

16


such amount is paid to the Company at such time as may be required by the Company, (iv) to the extent permitted by the Administrator, delivery of a promissory note or any other lawful consideration or (v) to the extent permitted by the Administrator, any combination of the foregoing payment forms. If any tax withholding obligation will be satisfied under clause (ii) of the immediately preceding sentence by the Company’s retention of Shares from the Award creating the tax obligation and there is a public market for Shares at the time the tax obligation is satisfied, the Company may elect to instruct any brokerage firm determined acceptable to the Company for such purpose to sell on the applicable Participant’s behalf some or all of the Shares retained and to remit the proceeds of the sale to the Company or its designee, and each Participant’s acceptance of an Award under the Plan will constitute the Participant’s authorization to the Company and instruction and authorization to such brokerage firm to complete the transactions described in this sentence.

10.6    Amendment of Award; Repricing. The Administrator may amend, modify or terminate any outstanding Award, including by substituting another Award of the same or a different type, changing the exercise or settlement date, and converting an Incentive Stock Option to a Nonqualified Stock Option. The Participant’s consent to such action will be required unless (i) the action, taking into account any related action, does not materially and adversely affect the Participant’s rights under the Award, or (ii) the change is permitted under Article IX or pursuant to Section 11.6. In addition, the Administrator shall, without the approval of the stockholders of the Company, have the authority to (a) amend any outstanding Option or Stock Appreciation Right to reduce its exercise price per Share, or (b) cancel any Option or Stock Appreciation Right in exchange for cash or another Award.

10.7    Conditions on Delivery of Stock. The Company will not be obligated to deliver any Shares under the Plan or remove restrictions from Shares previously delivered under the Plan until (i) all Award conditions have been met or removed to the Company’s satisfaction, (ii) as determined by the Company, all other legal matters regarding the issuance and delivery of such Shares have been satisfied, including any applicable securities laws and stock exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Administrator deems necessary or appropriate to satisfy Applicable Law. The Company’s inability to obtain authority from any regulatory body having jurisdiction, which the Administrator determines is necessary to the lawful issuance and sale of any securities, will relieve the Company of any liability for failing to issue or sell such Shares as to which such requisite authority has not been obtained.

10.8    Acceleration. The Administrator may at any time provide that any Award will become immediately vested and fully or partially exercisable, free of some or all restrictions or conditions, or otherwise fully or partially realizable.

ARTICLE XI.

MISCELLANEOUS

11.1    No Right to Employment or Other Status. No person will have any claim or right to be granted an Award, and the grant of an Award will not be construed as giving a Participant the right to continue employment or any other relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan or any Award, except as expressly provided in an Award Agreement or other written agreement between the Participant and the Company or any Subsidiary.

11.2    No Rights as Stockholder; Certificates. Subject to the Award Agreement, no Participant or Designated Beneficiary will have any rights as a stockholder with respect to any Shares to be distributed under an Award until becoming the record holder of such Shares. Notwithstanding any other provision of the Plan, unless the Administrator otherwise determines or Applicable Law requires, the Company will not

 

17


be required to deliver to any Participant certificates evidencing Shares issued in connection with any Award and instead such Shares may be recorded in the books of the Company (or, as applicable, its transfer agent or stock plan administrator). The Company may place legends on any share certificate or book entry to reference restrictions applicable to the Shares (including, without limitation, restrictions applicable to Restricted Stock).

11.3    Effective Date. The Plan will become effective on the day prior to the Public Trading Date (the “Effective Date”). No Incentive Stock Option may be granted pursuant to the Plan after the tenth anniversary of the earlier of (i) the date the Plan was approved by the Board and (ii) the date the Plan was approved by the Company’s stockholders.

11.4    Amendment of Plan. The Board may amend, suspend or terminate the Plan at any time and from time to time; provided that (a) no amendment requiring stockholder approval to comply with Applicable Law shall be effective unless approved by the Board, and (b) no amendment, other than an increase to the Overall Share Limit or pursuant to Article IX or Section 11.6, may materially and adversely affect any Award outstanding at the time of such amendment without the affected Participant’s consent. No Awards may be granted under the Plan during any suspension period or after Plan termination. Awards outstanding at the time of any Plan suspension or termination will continue to be governed by the Plan and the Award Agreement, as in effect before such suspension or termination. The Board will obtain stockholder approval of any Plan amendment to the extent necessary to comply with Applicable Law.

11.5    Provisions for Foreign Participants. The Administrator may modify Awards granted to Participants who are foreign nationals or employed outside the United States, establish subplans or procedures under the Plan or take any other necessary or appropriate action to address Applicable Law, including (a) differences in laws, rules, regulations or customs of such foreign jurisdictions with respect to tax, securities, currency, employee benefit or other matters, (b) listing and other requirements of any foreign securities exchange, and (c) any necessary local governmental or regulatory exemptions or approvals.

11.6    Section 409A.

(a)    General. The Company intends that all Awards be structured to comply with, or be exempt from, Section 409A, such that no adverse tax consequences, interest, or penalties under Section 409A apply. Notwithstanding anything in the Plan or any Award Agreement to the contrary, the Administrator may, without a Participant’s consent, amend this Plan or Awards, adopt policies and procedures, or take any other actions (including amendments, policies, procedures and retroactive actions) as are necessary or appropriate to preserve the intended tax treatment of Awards, including any such actions intended to (A) exempt this Plan or any Award from Section 409A, or (B) comply with Section 409A, including regulations, guidance, compliance programs and other interpretative authority that may be issued after an Award’s grant date. The Company makes no representations or warranties as to an Award’s tax treatment under Section 409A or otherwise. The Company will have no obligation under this Section 11.6 or otherwise to avoid the taxes, penalties or interest under Section 409A with respect to any Award and will have no liability to any Participant or any other person if any Award, compensation or other benefits under the Plan are determined to constitute noncompliant “nonqualified deferred compensation” subject to taxes, penalties or interest under Section 409A.

(b)    Separation from Service. If an Award constitutes “nonqualified deferred compensation” under Section 409A, any payment or settlement of such Award upon a Participant’s Termination of Service will, to the extent necessary to avoid taxes under Section 409A, be made only upon the Participant’s “separation from service” (within the meaning of Section 409A), whether such “separation from service” occurs upon or after the Participant’s Termination of Service. For purposes of this Plan or any Award Agreement relating to any such payments or benefits, references to a “termination,” “termination of employment” or like terms means a “separation from service.”

 

18


(c)    Payments to Specified Employees. Notwithstanding any contrary provision in the Plan or any Award Agreement, any payment(s) of “nonqualified deferred compensation” required to be made under an Award to a “specified employee” (as defined under Section 409A and as the Administrator determines) due to his or her “separation from service” will, to the extent necessary to avoid taxes under Section 409A(a)(2)(B)(i) of the Code, be delayed for the six-month period immediately following such “separation from service” (or, if earlier, until the specified employee’s death) and will instead be paid (as set forth in the Award Agreement) on the day immediately following such six-month period or as soon as administratively practicable thereafter (without interest). Any payments of “nonqualified deferred compensation” under such Award payable more than six months following the Participant’s “separation from service” will be paid at the time or times the payments are otherwise scheduled to be made.

11.7    Limitations on Liability. Notwithstanding any other provisions of the Plan, no individual acting as a director, officer or other employee of the Company or any Subsidiary will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection with the Plan or any Award, and such individual will not be personally liable with respect to the Plan because of any contract or other instrument executed in his or her capacity as an Administrator, director, officer or other employee of the Company or any Subsidiary. The Company will indemnify and hold harmless each director, officer or other employee of the Company or any Subsidiary that has been or will be granted or delegated any duty or power relating to the Plan’s administration or interpretation, against any cost or expense (including attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Administrator’s approval) arising from any act or omission concerning this Plan unless arising from such person’s own fraud or bad faith; provided that he or she gives the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf.

11.8    Data Privacy. As a condition for receiving any Award, each Participant explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of personal data as described in this Section by and among the Company and its Subsidiaries and affiliates exclusively for implementing, administering and managing the Participant’s participation in the Plan. The Company and its Subsidiaries and affiliates may hold certain personal information about a Participant, including the Participant’s name, address and telephone number; birthdate; social security, insurance number or other identification number; salary; nationality; job title(s); any Shares held in the Company or its Subsidiaries and affiliates; and Award details, to implement, manage and administer the Plan and Awards (the “Data”). The Company and its Subsidiaries and affiliates may transfer the Data amongst themselves as necessary to implement, administer and manage a Participant’s participation in the Plan, and the Company and its Subsidiaries and affiliates may transfer the Data to third parties assisting the Company with Plan implementation, administration and management. These recipients may be located in the Participant’s country, or elsewhere, and the Participant’s country may have different data privacy laws and protections than the recipients’ country. By accepting an Award, each Participant authorizes such recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, to implement, administer and manage the Participant’s participation in the Plan, including any required Data transfer to a broker or other third party with whom the Company or the Participant may elect to deposit any Shares. The Data related to a Participant will be held only as long as necessary to implement, administer, and manage the Participant’s participation in the Plan. A Participant may, at any time, view the Data that the Company holds regarding such Participant, request additional information about the storage and processing of the Data regarding such Participant, recommend any necessary corrections to the Data regarding the Participant or refuse or withdraw the consents in this Section 11.8 in writing, without cost, by contacting the local human resources representative. The Company may cancel Participant’s ability to participate in the Plan and, in the

 

19


Administrator’s sole discretion, the Participant may forfeit any outstanding Awards if the Participant refuses or withdraws the consents in this Section 11.8. For more information on the consequences of refusing or withdrawing consent, Participants may contact their local human resources representative.

11.9    Severability. If any portion of the Plan or any action taken under it is held illegal or invalid for any reason, the illegality or invalidity will not affect the remaining parts of the Plan, and the Plan will be construed and enforced as if the illegal or invalid provisions had been excluded, and the illegal or invalid action will be null and void.

11.10    Governing Documents. If any contradiction occurs between the Plan and any Award Agreement or other written agreement between a Participant and the Company (or any Subsidiary), the Plan will govern, unless such Award Agreement or other written agreement was approved by the Administrator and expressly provides that a specific provision of the Plan will not apply.

11.11    Governing Law. The Plan and all Awards will be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to the conflict of law rules thereof or of any other jurisdiction.

11.12    Clawback Provisions. All Awards (including the gross amount of any proceeds, gains or other economic benefit the Participant actually or constructively receives upon receipt or exercise of any Award or the receipt or resale of any Shares underlying the Award) will be subject to recoupment by the Company to the extent required to comply with Applicable Law or any policy of the Company providing for the reimbursement of incentive compensation, whether or not such policy was in place at the time of grant of an Award.

11.13    Titles and Headings. The titles and headings in the Plan are for convenience of reference only and, if any conflict, the Plan’s text, rather than such titles or headings, will control.

11.14    Conformity to Applicable Law. Participant acknowledges that the Plan is intended to conform to the extent necessary with Applicable Law. Notwithstanding anything herein to the contrary, the Plan and all Awards will be administered only in a manner intended to conform with Applicable Law. To the extent Applicable Law permit, the Plan and all Award Agreements will be deemed amended as necessary to conform to Applicable Law.

11.15    Relationship to Other Benefits. No payment under the Plan will be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare or other benefit plan of the Company or any Subsidiary, except as expressly provided in writing in such other plan or an agreement thereunder.

11.16    Unfunded Status of Awards. The Plan is intended to be an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or Award Agreement shall give the Participant any rights that are greater than those of a general creditor of the Company or any Subsidiary.

11.17    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan, the Plan and any Award granted or awarded to any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 of the Exchange Act and any amendments thereto) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, the Plan and Awards granted or awarded hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

 

20


11.18    Prohibition on Executive Officer Loans. Notwithstanding any other provision of the Plan to the contrary, no Participant who is a Director or an “executive officer” of the Company within the meaning of Section 13(k) of the Exchange Act shall be permitted to make payment with respect to any Awards granted under the Plan, or continue any extension of credit with respect to such payment, with a loan from the Company or a loan arranged by the Company in violation of Section 13(k) of the Exchange Act.

11.19    Broker-Assisted Sales. In the event of a broker-assisted sale of Shares in connection with the payment of amounts owed by a Participant under or with respect to the Plan or Awards, including amounts to be paid under the final sentence of Section 10.5: (a) any Shares to be sold through the broker-assisted sale will be sold on the day the payment first becomes due, or as soon thereafter as practicable; (b) such Shares may be sold as part of a block trade with other Participants in the Plan in which all participants receive an average price; (c) the applicable Participant will be responsible for all broker’s fees and other costs of sale, and by accepting an Award, each Participant agrees to indemnify and hold the Company harmless from any losses, costs, damages, or expenses relating to any such sale; (d) to the extent the Company or its designee receives proceeds of such sale that exceed the amount owed, the Company will pay such excess in cash to the applicable Participant as soon as reasonably practicable; (e) the Company and its designees are under no obligation to arrange for such sale at any particular price; and (f) in the event the proceeds of such sale are insufficient to satisfy the Participant’s applicable obligation, the Participant may be required to pay immediately upon demand to the Company or its designee an amount in cash sufficient to satisfy any remaining portion of the Participant’s obligation.

*    *    *    *    *

 

21


I hereby certify that the foregoing Plan was adopted by the Board of Directors of Berkeley Lights, Inc. on [                ], 2020.

I hereby certify that the foregoing Plan was approved by the stockholders of Berkeley Lights, Inc. on [                ], 2020.

Executed on [                ], 2020.

 

 

 

Corporate Secretary

Exhibit 10.2(b)

BERKELEY LIGHTS, INC.

2020 INCENTIVE AWARD PLAN

STOCK OPTION GRANT NOTICE

Berkeley Lights, Inc., a Delaware corporation, (the “Company”), pursuant to its 2020 Incentive Award Plan, as may be amended from time to time (the “Plan”), hereby grants to the holder listed below (“Participant”), an option to purchase the number of shares of the Company’s Common Stock (the “Shares”), set forth below (the “Option”). This Option is subject to all of the terms and conditions set forth herein, as well as in the Plan and the Stock Option Agreement attached hereto as Exhibit A (the “Stock Option Agreement”), each of which are incorporated herein by reference, including all exhibits or attachments thereto. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Option Agreement.

 

Participant:   

[____________]

Grant Date:   

[____________]

Vesting Commencement Date:   

[____________]

Exercise Price per Share:   

$[___]

Total Exercise Price:   

$[____________]

Total Number of Shares Subject to the Option:   

[_______]

Expiration Date:   

[____________]

Vesting Schedule:   

[____________]

Type of Option:                 ☐    Incentive Stock Option        ☐    Nonqualified Stock Option

By his or her signature and the Company’s signature below, Participant agrees to be bound by the terms and conditions of the Plan, the Stock Option Agreement, and this Grant Notice. Participant has reviewed the Stock Option Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock Option Agreement and the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Stock Option Agreement.

 

BERKELEY LIGHTS, INC.:

     PARTICIPANT:   
By:                                           By:                                        
Print Name:                                           Print Name:                                        
Title :                                                                                  
Address:                                           Address:                                        
                                                                                 


EXHIBIT A

TO STOCK OPTION GRANT NOTICE

STOCK OPTION AGREEMENT

Pursuant to the Stock Option Grant Notice (the “Grant Notice”) to which this Stock Option Agreement (this “Agreement”) is attached, Berkeley Lights, Inc., a Delaware corporation (the “Company”), has granted to Participant an Option under the Company’s 2020 Incentive Award Plan, as may be amended from time to time (the “Plan”), to purchase the number of Shares indicated in the Grant Notice.

ARTICLE 1.

GENERAL

1.1    Defined Terms. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and the Grant Notice.

1.2    Incorporation of Terms of Plan. The Option is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. If the Non-U.S. Provisions (as defined in Article 5) apply to Participant, in the event of a conflict between the terms of this Agreement or the Plan and the Non-U.S. Provisions, the terms of the Non-U.S. Provisions shall control.

ARTICLE 2.

GRANT OF OPTION

2.1    Grant of Option. In consideration of Participant’s past and/or continued employment with or service to the Company or any Subsidiary and for other good and valuable consideration, effective as of the Grant Date set forth in the Grant Notice (the “Grant Date”), the Company irrevocably grants to Participant the Option to purchase any part or all of an aggregate of the number of Shares set forth in the Grant Notice, upon the terms and conditions set forth in the Plan and this Agreement, subject to adjustments as provided in Article IX of the Plan. Unless designated as a Nonqualified Stock Option in the Grant Notice, the Option shall be an Incentive Stock Option to the maximum extent permitted by law.

2.2    Exercise Price. The exercise price of the Shares subject to the Option shall be as set forth in the Grant Notice, without commission or other charge; provided, however, that the price per share of the Shares subject to the Option shall not be less than 100% of the Fair Market Value of a Share on the Grant Date. Notwithstanding the foregoing, if this Option is designated as an Incentive Stock Option and Participant is a Greater Than 10% Stockholder as of the Grant Date, the exercise price per share of the Shares subject to the Option shall not be less than 110% of the Fair Market Value of a Share on the Grant Date.

2.3    Consideration to the Company. In consideration of the grant of the Option by the Company, Participant agrees to render faithful and efficient services to the Company or any Subsidiary. Nothing in the Plan or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and Participant.

 

A-1


ARTICLE 3.

PERIOD OF EXERCISABILITY

3.1    Commencement of Exercisability.

(a)    Subject to Sections 3.2, 3.3, 5.11 and 5.17 hereof, the Option shall become vested and exercisable in such amounts and at such times as are set forth in the Grant Notice.

(b)    No portion of the Option which has not become vested and exercisable at the date of Participant’s Termination of Service shall thereafter become vested and exercisable, except as may be otherwise provided by the Administrator or as set forth in a written agreement between the Company and Participant.

(c)    Notwithstanding Section 3.1(a) hereof and the Grant Notice, but subject to Section 3.1(b) hereof, in the event of a Change in Control the Option shall be treated pursuant to Sections 9.2 and 9.3 of the Plan.

3.2    Duration of Exercisability. The installments provided for in the vesting schedule set forth in the Grant Notice are cumulative. Each such installment which becomes vested and exercisable pursuant to the vesting schedule set forth in the Grant Notice shall remain vested and exercisable until it becomes unexercisable under Section 3.3 hereof.

3.3    Expiration of Option. The Option may not be exercised to any extent by anyone after the first to occur of the following events:

(a)    The Expiration Date set forth in the Grant Notice, which shall in no event be more than ten (10) years from the Grant Date;

(b)    If this Option is designated as an Incentive Stock Option and Participant, at the time the Option was granted, was a Greater Than 10% Stockholder, the expiration of five (5) years from the Grant Date;

(c)    The expiration of three (3) months from the date of Participant’s Termination of Service, unless such termination occurs by reason of Participant’s death or Disability; or

(d)    The expiration of one (1) year from the date of Participant’s Termination of Service by reason of Participant’s death or Disability.

3.4    Special Tax Consequences. Participant acknowledges that, to the extent that the aggregate Fair Market Value (determined as of the time the Option is granted) of all Shares with respect to which Incentive Stock Options, including the Option (if applicable), are exercisable for the first time by Participant in any calendar year exceeds $100,000, the Option and such other options shall be Nonqualified Stock Options to the extent necessary to comply with the limitations imposed by Section 422(d) of the Code. Participant further acknowledges that the rule set forth in the preceding sentence shall be applied by taking the Option and other “incentive stock options” into account in the order in which they were granted, as determined under Section 422(d) of the Code and the Treasury Regulations thereunder. Participant also acknowledges that an Incentive Stock Option exercised more than three (3) months after Participant’s Termination of Employment, other than by reason of death or Disability, will be taxed as a Nonqualified Stock Option.

 

A-2


3.5    Tax Indemnity.

(a)    Participant agrees to indemnify and keep indemnified the Company, any Subsidiary and Participant’s employing company, if different, from and against any liability for or obligation to pay any Tax Liability (a “Tax Liability” being any liability for income tax, withholding tax, fringe benefit tax and any other employment related taxes or social security, social insurance or national insurance contributions in any jurisdiction) that is attributable to (1) the grant or exercise of, or any benefit derived by Participant from, the Option, (2) the acquisition by Participant of the Shares on exercise of the Option or (3) the disposal of any Shares.

(b)    The Option cannot be exercised until Participant has made such arrangements as the Company may require for the satisfaction of any Tax Liability that may arise in connection with the exercise of the Option and/or the acquisition of the Shares by Participant. The Company shall not be required to issue, allot or transfer Shares until Participant has satisfied this obligation.

(c)    Participant hereby acknowledges that the Company (i) makes no representations or undertakings regarding the treatment of any Tax Liabilities in connection with any aspect of the Option and (ii) does not commit to and is under no obligation to structure the terms of the grant or any aspect of any Award, including the Option, to reduce or eliminate Participant’s liability for Tax Liabilities or achieve any particular tax result. Furthermore, if Participant becomes subject to tax in more than one jurisdiction between the date of grant of an Award, including the Option, and the date of any relevant taxable event, Participant acknowledges that the Company may be required to withhold or account for Tax Liabilities in more than one jurisdiction.

ARTICLE 4.

EXERCISE OF OPTION

4.1    Person Eligible to Exercise. Except as provided in Section 5.3 hereof, during the lifetime of Participant, only Participant may exercise the Option or any portion thereof, unless it has been disposed of pursuant to a DRO. After the death of Participant, any exercisable portion of the Option may, prior to the time when the Option becomes unexercisable under Section 3.3 hereof, be exercised by the deceased Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then applicable laws of descent and distribution.

4.2    Partial Exercise. Any exercisable portion of the Option or the entire Option, if then wholly exercisable, may be exercised in whole or in part at any time prior to the time when the Option or portion thereof becomes unexercisable under Section 3.3 hereof. However, the Option shall not be exercisable with respect to fractional Shares.

4.3    Manner of Exercise. The Option, or any exercisable portion thereof, may be exercised solely by delivery to the Secretary of the Company (or any third party administrator or other person or entity designated by the Company; for the avoidance of doubt, delivery shall include electronic delivery), during regular business hours, of all of the following prior to the time when the Option or such portion thereof becomes unexercisable under Section 3.3 hereof:

(a)    An exercise notice in a form specified by the Administrator, stating that the Option or portion thereof is thereby exercised, such notice complying with all applicable rules established by the Administrator. The notice shall be signed by Participant or other person then entitled to exercise the Option or such portion of the Option;

 

A-3


(b)    The receipt by the Company of full payment for the Shares with respect to which the Option or portion thereof is exercised, including payment of any applicable withholding tax, which shall be made by deduction from other compensation payable to Participant or in such other form of consideration permitted under Section 4.4 hereof that is acceptable to the Company;

(c)    Any other written representations or documents as may be required in the Administrator’s sole discretion to evidence compliance with the Securities Act, the Exchange Act or any other applicable law, rule or regulation; and

(d)    In the event the Option or portion thereof shall be exercised pursuant to Section 4.1 hereof by any person or persons other than Participant, appropriate proof of the right of such person or persons to exercise the Option.

Notwithstanding any of the foregoing, the Company shall have the right to specify all conditions of the manner of exercise, which conditions may vary by country and which may be subject to change from time to time.

4.4    Method of Payment. Payment of the exercise price shall be by any of the following, or a combination thereof, at the election of Participant:

(a)    Cash or check;

(b)    With the consent of the Administrator, surrender of Shares (including, without limitation, Shares otherwise issuable upon exercise of the Option) held for such period of time as may be required by the Administrator in order to avoid adverse accounting consequences and having a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; or

(c)    Other legal consideration acceptable to the Administrator (including, without limitation, through the delivery of a notice that Participant has placed a market sell order with a broker with respect to Shares then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; provided that payment of such proceeds is then made to the Company at such time as may be required by the Company, but in any event not later than the settlement of such sale).

4.5    Conditions to Issuance of Shares. The Shares deliverable upon the exercise of the Option, or any portion thereof, may be either previously authorized but unissued Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue or deliver any Shares purchased upon the exercise of the Option or portion thereof prior to fulfillment of all of the conditions in Section 10.7 of the Plan and following conditions:

(a)    The admission of such Shares to listing on all stock exchanges on which such Shares are then listed;

(b)    The completion of any registration or other qualification of such Shares under any state or federal law or under rulings or regulations of the Securities and Exchange Commission or of any other governmental regulatory body, which the Administrator shall, in its absolute discretion, deem necessary or advisable;

 

A-4


(c)    The obtaining of any approval or other clearance from any state or federal governmental agency which the Administrator shall, in its absolute discretion, determine to be necessary or advisable;

(d)    The receipt by the Company of full payment for such Shares, including payment of any applicable Tax Liability, which may be in one or more of the forms of consideration permitted under Section 4.4 hereof; and

(e)    The lapse of such reasonable period of time following the exercise of the Option as the Administrator may from time to time establish for reasons of administrative convenience.

4.6    Rights as Stockholder. The holder of the Option shall not be, nor have any of the rights or privileges of, a stockholder of the Company, including, without limitation, voting rights and rights to dividends, in respect of any Shares purchasable upon the exercise of any part of the Option unless and until such Shares shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Article IX of the Plan.

ARTICLE 5.

OTHER PROVISIONS

5.1    Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon Participant, the Company and all other interested persons. No member of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Option.

5.2    Whole Shares. The Option may only be exercised for whole Shares.

5.3    Option Not Transferable.

(a)    Subject to Section 4.1 hereof, the Option may not be sold, pledged, assigned or transferred in any manner other than by will or the laws of descent and distribution or, subject to the consent of the Administrator, pursuant to a DRO, unless and until the Option has been exercised and the Shares underlying the Option have been issued, and all restrictions applicable to such Shares have lapsed. Neither the Option nor any interest or right therein shall be liable for the debts, contracts or engagements of Participant or his or her successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, hypothecation, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy) unless and until the Option has been exercised, and any attempted disposition thereof prior to exercise shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence.

 

A-5


(b)    During the lifetime of Participant, only Participant may exercise the Option (or any portion thereof), unless it has been disposed of pursuant to a DRO; after the death of Participant, any exercisable portion of the Option may, prior to the time when such portion becomes unexercisable under the Plan or this Agreement, be exercised by Participant’s personal representative or by any person empowered to do so under the deceased Participant’s will or under the then-applicable laws of descent and distribution.

(c)    Notwithstanding any other provision in this Agreement, Participant may, in the manner determined by the Administrator, designate a beneficiary to exercise the rights of Participant and to receive any distribution with respect to the Option upon Participant’s death. A beneficiary, legal guardian, legal representative, or other person claiming any rights pursuant to the Plan is subject to all terms and conditions of the Plan and this Agreement, except to the extent the Plan and this Agreement otherwise provide, and to any additional restrictions deemed necessary or appropriate by the Administrator. If Participant is married or a domestic partner in a domestic partnership qualified under Applicable Law and resides in a community property state, a designation of a person other than Participant’s spouse or domestic partner, as applicable, as his or her beneficiary with respect to more than 50% of Participant’s interest in the Option shall not be effective without the prior written consent of Participant’s spouse or domestic partner. If no beneficiary has been designated or survives Participant, payment shall be made to the person entitled thereto pursuant to Participant’s will or the laws of descent and distribution. Subject to the foregoing, a beneficiary designation may be changed or revoked by Participant at any time provided the change or revocation is filed with the Administrator prior to Participant’s death.

5.4    Tax Consultation. Participant understands that Participant may suffer adverse tax consequences as a result of the grant, vesting and/or exercise of the Option, and/or with the purchase or disposition of the Shares subject to the Option. Participant represents that Participant has consulted with any tax consultants Participant deems advisable in connection with the purchase or disposition of such Shares and that Participant is not relying on the Company for any tax advice.

5.5    Binding Agreement. Subject to the limitation on the transferability of the Option contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

5.6    Adjustments Upon Specified Events. The Administrator may accelerate the vesting of the Option in such circumstances as it, in its sole discretion, may determine. In addition, upon the occurrence of certain events relating to the Shares contemplated by Article IX of the Plan (including, without limitation, an extraordinary cash dividend on such Shares), the Administrator shall make such adjustments the Administrator deems appropriate in the number of Shares subject to the Option, the exercise price of the Option and the kind of securities that may be issued upon exercise of the Option. Participant acknowledges that the Option is subject to adjustment, modification and termination in certain events as provided in this Agreement and Article IX of the Plan.

5.7    Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to Participant shall be addressed to Participant at Participant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 5.7, either party may hereafter designate a different address for notices to be given to that party. Any notice which is required to be given to Participant shall, if Participant is then deceased, be given to the person entitled to exercise his or her Option pursuant to Section 4.1 hereof by written notice under this Section 5.7. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service (or any similar foreign entity).

 

A-6


5.8    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

5.9    Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

5.10    Conformity to Securities Laws. Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all Applicable Law and regulations and rules promulgated by the Securities and Exchange Commission thereunder, and state securities laws and regulations. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Option is granted and may be exercised, only in such a manner as to conform to such Applicable Law. To the extent permitted by applicable law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law.

5.11    Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board; provided, however, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Option in any material way without the prior written consent of Participant.

5.12    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 5.3 hereof, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

5.13    Notification of Disposition. If this Option is designated as an Incentive Stock Option, Participant shall give prompt notice to the Company of any disposition or other transfer of any Shares acquired under this Agreement if such disposition or transfer is made (a) within two (2) years from the Grant Date with respect to such Shares or (b) within one (1) year after the transfer of such Shares to Participant. Such notice shall specify the date of such disposition or other transfer and the amount realized, in cash, other property, assumption of indebtedness or other consideration, by Participant in such disposition or other transfer.

5.14    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Plan, the Option and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

5.15    Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries or interfere with or restrict in any way with the right of the Company

 

A-7


or any of its Subsidiaries, which rights are hereby expressly reserved, to discharge or to terminate for any reason whatsoever, with or without cause, the services of Participant’s at any time (unless otherwise required by applicable law or any service agreement by and between Participant and Participant’s employer).

5.16    Entire Agreement. The Plan, the Grant Notice and this Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Participant with respect to the subject matter hereof.

5.17    Section 409A. This Option is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that the Option (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate either for the Option to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.

5.18    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. Participant shall have only the rights of a general unsecured creditor of the Company with respect to amounts credited and benefits payable, if any, with respect to the Option, and rights no greater than the right to receive the Shares as a general unsecured creditor with respect to options, as and when exercised pursuant to the terms hereof.

5.19    Data Privacy. Without limiting any other provisions of this Agreement, Section 11.8 (“Data Privacy”) of the Plan is hereby incorporated into this Agreement as if first set forth herein. If Participant resides in the UK or the European Union, the Company and its Subsidiaries and affiliates will hold, collect and otherwise process certain data as set out in the applicable company’s GDPR-compliant data privacy notice, which will be or has been provided to you separately. All personal data will be treated in accordance with applicable data protection laws and regulations.

5.20    Special Provisions for Options Granted to Participants Outside the U.S. If Participant performs services for the Company outside of the United States, this Option shall be subject to the special provisions, if any, for Participant’s country of residence, as set forth in Exhibit A-1 (the “Non-U.S. Provisions”). If Participant relocates to one of the countries included in the Non-U.S. Provisions during the life of this Option, the special provisions for such country shall apply to Participant, to the extent the Company determines that the application of such provisions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Company reserves the right to impose other requirements on this Option and the Shares purchased upon exercise of this Option, to the extent the Company determines it is necessary or advisable in order to comply with local laws or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

 

A-8


5.21    Acknowledgment of Nature of Plan and Option. In accepting this Option, Participant acknowledges that:

(a)    for labor law purposes, the Option and the Shares subject to the Option are an extraordinary item that does not constitute wages of any kind for services of any kind rendered to the Company or to Participant’s service entity, and the award of the Option is outside the scope of Participant’s service contract, if any;

(b)    for labor law purposes, the Option and the Shares subject to the Option are not part of normal or expected wages or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, holiday pay, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company, the Participant’s employer, its parent, or any Subsidiary or affiliate of the Company;

(c)    the Option and the Shares subject to the Option are not intended to replace any pension rights or compensation;

(d)    neither the Option nor any provision of this Agreement, the Plan or the policies adopted pursuant to the Plan confer upon Participant any right with respect to service or continuation of current service and shall not be interpreted to form a service contract or relationship with the Company or any subsidiary or affiliate;

(e)    the future value of the underlying Shares is unknown and cannot be predicted with certainty;

(f)    if the underlying Shares do not increase in value, the Option will have no value; and

(g)    if Participant exercises the Option and acquires Shares, the value of the Shares acquired upon exercise may increase or decrease in value, even below the exercise price of the Option.

*    *    *    *    *

 

A-9


EXHIBIT A-1

TO STOCK OPTION AGREEMENT

SPECIAL PROVISIONS FOR PARTICIPANTS OUTSIDE THE UNITED STATES

This Exhibit A-1 (this “Appendix”) includes special terms and conditions applicable to Participants in the countries below. These terms and conditions are in addition to those set forth in the Stock Option Agreement (the “Agreement”) and the Plan and to the extent there are any inconsistencies between these terms and conditions and those set forth in the Agreement, these terms and conditions shall prevail. Any capitalized term used in this Exhibit A-1 without definition shall have the meaning ascribed to such term in the Plan or the Agreement, as applicable.

This Appendix also includes information relating to exchange control and other issues of which Participant should be aware with respect to his or her participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the respective countries as of June 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information herein as the only source of information relating to the consequences of participation in the Plan because the information may be out of date at the time the Option is exercised or Shares acquired under the Plan are sold.

In addition, the information is general in nature and may not apply to the particular situation of Participant, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in his or her country may apply to his or her situation. Finally, if Participant is a citizen or resident of a country other than the one in which he or she is currently working, the information contained herein may not be applicable to Participant.

FRANCE

Securities Law. This offer does not require a prospectus to be submitted for approval to the Autorité des Marchés Financiers (“AMF”). Participant may take part in the offer solely for his or her own account and any financial instruments thus acquired cannot be distributed directly or indirectly to the public otherwise than in accordance with Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the Monetary and Financial Code. The information provided to Participant in this Agreement, the Plan or other documents supplied to Participant in connection with the offer to Participant of the Option is provided as factual information only and as such is not intended to induce Participant to accept to enter into this Agreement. Any such information does not give or purport to give any indication of the likely future financial success or performance of the Company and historical financial information gives no indication of future financial performance. This Option is not intended to qualify for any favorable tax and social security treatment in France. Should Participant be in any doubt as to the contents of the offer of the Option or what course of action to take in relation to the offer, Participant is recommended to immediately seek his or her own personal financial advice from his or her stockbroker, bank manager, solicitor, accountant or other independent financial advisor duly authorized by the competent authorities or bodies.

Exchange Control Information. Participant must declare to the customs and excise authorities any cash and securities the Participant imports or exports without the use of a financial institution when the value of such cash or securities exceeds a certain amount. Participant should consult with Participant’s professional advisor. In addition, if the Participant is a French resident, the Participant may hold stock outside France provided Participant declares all foreign bank and brokerage accounts on an annual basis (including the accounts that were open and those that were closed during the tax year) on a specific form in Participant’s income tax return.

 

A-1-1


French Language Provision. By signing and returning this Agreement, Participant confirms having read and understood the documents relating to the Plan which were provided to Participant in English language. The Participant accepts the terms of those documents accordingly.

En signant et renvoyant ce Contrat vous confirmez ainsi avoir lu et compris les documents relatifs au Plan qui vous ont été communiqués en langue anglaise. Vous en acceptez les termes en connaissance de cause.

GERMANY

Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank. If Participant uses a German bank to transfer a cross-border payment in excess of €12,500 in connection with the sale of Shares acquired under the Plan, the bank will make the report for Participant. In addition, Participant must report any receivables, payables, or debts in foreign currency exceeding an amount of €5,000,000 on a monthly basis. Finally, Participant must report on an annual basis if Participant holds Shares that exceed 10% of the total voting capital of the Company.

The following shall replace Section 3.5 of the Agreement in its entirety:

3.5     Tax Indemnity.

(a)    To the extent permitted by law, Participant agrees to indemnify and keep indemnified the Company, any subsidiary and his/her employing company, if different, from and against any liability for or obligation to pay any Tax Liability (a “Tax Liability” for purposes of this Section 4.9, being any Participant liability for income tax, withholding tax, superannuation and any other employment related taxes in any jurisdiction, including but not limited to wage tax, solidarity surcharge, church tax or social security contributions) that is attributable to (1) the grant or exercise of, or any benefit derived by Participant from, the Option, (2) the acquisition by Participant of the Shares on exercise of the Option, or (3) the disposal of any Shares.

(b)    The Option cannot be exercised until Participant has made such arrangements as the Company may require for the satisfaction of any Tax Liability that may arise in connection with the exercise of the Option and/or the acquisition of the Shares by Participant. The Company shall not be required to issue, allot or transfer Shares until the Participant has satisfied this obligation

SWITZERLAND

Securities Law Information. The Option is considered a private offering in Switzerland; therefore, it is not subject to registration.

UNITED KINGDOM

Definitions

The phrases “termination of service” or “termination of employment” as used in the Plan and the Agreement shall mean the Participant’s Termination of Employment. For this purpose, “Termination of Employment” means the time when the employee-employer relationship between the Participant and the Company or any subsidiary is terminated for any reason, with or without cause, including, but not by way

 

A-1-2


of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment.

Participants

The Agreement as amended pursuant to this Exhibit A-1 forms the rules of the employee share scheme applicable to the United Kingdom-based Participants of the Company and any subsidiaries. Only employees of the Company or any subsidiary are eligible to be granted Options or be issued Shares under the Agreement. Other service providers (including consultants or non-employee directors) who are not employees are not eligible to receive Options under the Agreement in the United Kingdom. Accordingly, all references in the Agreement to the Participant’s service or termination of service shall be interpreted as references to the Participant’s employment or Termination of Employment.

The following provision shall be added to the Agreement:

Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee of the Company or any of its subsidiaries and the grant of the Option does not form part of the Participant’s entitlement to remuneration or benefits in terms of his employment with the Company or any subsidiary.

Terms and Conditions

Special Tax Consequences.

(a)    At the discretion of the Company, the Option cannot be exercised until the Participant has entered into an election with the Company or the Participant’s employer (the “Employer”) (as appropriate) in a form approved by the Company and Her Majesty’s Revenue & Customs (a “Joint Election”) under which any liability of the Company and/or the Employer for Employer’s national insurance contributions arising in respect of the granting, vesting, exercise of or other dealing in the Option, or the acquisition of Shares on the exercise of the Option, is transferred to and met by the Participant.

(b)    The Participant undertakes that, upon request by the Company, he or she will (on or within 14 days of acquiring the Shares) join with his or her Employer in electing, pursuant to Section 431(1) of the Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”) that, for relevant tax purposes, the market value of the Shares acquired on exercise of the Option on any occasion will be calculated as if the Shares were not restricted and Sections 425 to 430 (inclusive) of ITEPA are not to apply to such Shares.

Tax and National Insurance Contributions Acknowledgment. The Participant agrees that if the Participant does not pay or the Employer or the Company does not withhold from the Participant, the full amount of all taxes applicable to the taxable income resulting from the grant of the Option, the exercise of the Option, or the issuance of Shares (the “Tax-Related Items”) that Participant owes due to the exercise of the Option, or the release or assignment of the Option for consideration, or the receipt of any other benefit in connection with the Option (the “Taxable Event”) by 90 days after the end of the tax year in which the Taxable Event occurred, then the amount that should have been withheld shall constitute a loan owed by the Participant to the Employer, effective 90 days after the end of the tax year in which the Taxable Event occurred. The Participant agrees that the loan will bear interest at the HMRC’s official rate and will be immediately due and repayable by the Participant, and the Company and/or the Employer may recover it

 

A-1-3


at any time thereafter by withholding the funds from salary, bonus or any other funds due to the Participant by the Employer, by withholding in Shares issued upon vesting and exercise of the Option or from the cash proceeds from the sale of Shares or by demanding cash or a cheque from the Participant. The Participant also authorizes the Company to delay the issuance of any Shares to the Participant unless and until the loan is repaid in full.

Notwithstanding the foregoing, if the Participant is an officer or executive director (as within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that the Participant is an officer or executive director and Tax-Related Items are not collected from or paid by the Participant within 90 days of the Taxable Event, the amount of any uncollected Tax-Related Items may constitute a benefit to the Participant on which additional income tax and national insurance contributions may be payable. The Participant acknowledges that the Company or the Employer may recover any such additional income tax and national insurance contributions at any time thereafter by any of the means referred to in Section 10.5 of the Plan.

References to “withholding tax” in the Agreement shall include social insurance contributions including primary and secondary class 1 national insurance contributions.

 

A-1-4

Exhibit 10.2(c)

BERKELEY LIGHTS, INC.

2020 INCENTIVE AWARD PLAN

RESTRICTED STOCK AWARD GRANT NOTICE

Berkeley Lights, Inc., a Delaware corporation, (the “Company”), pursuant to its 2020 Incentive Award Plan, as amended from time to time (the “Plan”), hereby grants to the holder listed below (the “Participant”) the number of shares of the Company’s Common Stock set forth below (the “Shares”) subject to all of the terms and conditions as set forth herein and in the Restricted Stock Award Agreement attached hereto as Exhibit A (the “Agreement”) (including without limitation the Restrictions on the Shares set forth in the Agreement) and the Plan, each of which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Award Grant Notice (the “Grant Notice”) and the Agreement.

 

Participant:   

[                                                                                      ]

Grant Date:   

[                                                                                      ]

Total Number of Shares of Restricted Stock:   

[                                         ]

Vesting Commencement Date:   

[                                                                                      ]

Vesting Schedule:   

[                             ]

Termination:    If the Participant experiences a Termination of Service, any Shares that have not become vested on or prior to the date of such Termination of Service will thereupon be automatically forfeited by the Participant, and the Participant’s rights in such Shares shall thereupon lapse and expire.

By his or her signature and the Company’s signature below, the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement. In addition, by signing below, the Participant also agrees that the Company, in its sole discretion, may satisfy any withholding obligations in accordance with Section 2.2(c) of the Agreement by (i) withholding shares of Common Stock otherwise issuable to the Participant upon vesting of the Shares, (ii) instructing a broker on the Participant’s behalf to sell Shares upon vesting and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.2(c) of the Agreement or the Plan.

 

BERKELEY LIGHTS, INC.:

  PARTICIPANT:
By:                                                                   By:                                                                 
Print Name:                                                                   Print Name:                                                                 
Title:                                                                     
Address:                                                                   Address:                                                                 
                                                                                                                                  

 

1


EXHIBIT A

TO RESTRICTED STOCK AWARD GRANT NOTICE

RESTRICTED STOCK AWARD AGREEMENT

Pursuant to the Restricted Stock Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Award Agreement (this “Agreement”) is attached, Berkeley Lights, Inc., a Delaware corporation, (the “Company”) has granted to the Participant the number of shares of Restricted Stock (the “Shares”) under the Company’s 2020 Incentive Award Plan, as amended from time to time (the “Plan”), as set forth in the Grant Notice.

ARTICLE I.

GENERAL

1.1    Defined Terms. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and Grant Notice.

1.2    Incorporation of Terms of Plan. The Award (as defined below) is subject to the terms and conditions of the Plan, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control.

ARTICLE II.

AWARD OF RESTRICTED STOCK

2.1    Award of Restricted Stock.

(a)    Award. Pursuant to the Grant Notice and upon the terms and conditions set forth in the Plan and this Agreement, effective as of the Grant Date set forth in the Grant Notice, the Company has granted to the Participant an award of Restricted Stock (the “Award”) under the Plan in consideration of the Participant’s past and/or continued employment with or service to the Company or any Subsidiary, and for other good and valuable consideration. The number of Shares subject to the Award is set forth in the Grant Notice. The Participant is an Employee, Director or Consultant of the Company or one of its Subsidiaries.

(b)    Escrow. The Participant, by acceptance of the Award, shall be deemed to appoint, and does so appoint, the Secretary of the Company or such other escrow holder as the Administrator may appoint to hold the Shares in escrow as the Participant’s attorney(s)-in-fact to effect any transfer of unvested forfeited Shares (or Shares otherwise reacquired by the Company hereunder) to the Company as may be required pursuant to the Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.

(c)    Removal of Notations. As soon as administratively practicable after the vesting of any Shares subject to the Award pursuant to Section 2.2(b) hereof, the Company shall remove the notations on any Shares subject to the Award which have vested (or such lesser number of Shares as may be permitted pursuant to Section 10.7 of the Plan). The Participant (or the beneficiary or personal representative of the Participant in the event of the Participant’s death or incapacity, as the case may be) shall deliver to the Company any representations or other documents or assurances required by the Company.

 

A-1


2.2    Restrictions.

(a)    Forfeiture. Notwithstanding any contrary provision of this Agreement, upon the Participant’s Termination of Service for any or no reason, any Shares subject to Restrictions shall thereupon be forfeited immediately and without any further action by the Company, and the Participant’s rights in such Shares shall thereupon lapse and expire.

(b)    Vesting and Lapse of Restrictions. As of the Grant Date, one hundred percent (100%) of the Shares shall be subject to a risk of forfeiture and the transfer restrictions set forth in Section 3.3 hereof (collectively, such risk of forfeiture and such transfer restrictions, the “Restrictions”). The Award shall vest and Restrictions shall lapse in accordance with the vesting schedule set forth in the Grant Notice (rounding down to the nearest whole Share).

(c)    Tax Withholding. As set forth in Section 10.5 of the Plan, the Company shall have the authority and the right to deduct or withhold, or to require the Participant to remit to the Company, an amount sufficient to satisfy all applicable federal, state and local taxes required by law to be withheld with respect to any taxable event arising in connection with the Award. The Company shall not be obligated to transfer Shares held in escrow to the Participant or the Participant’s legal representative until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all federal, state and local taxes applicable to the taxable income of the Participant resulting from the grant or vesting of the Award or the issuance of Shares.

(d)    Stop Transfer Instructions. To ensure compliance with the Restrictions, the provisions of the charter documents of the Company, and/or Applicable Law and for other proper purposes, the Company may issue appropriate “stop transfer” and other instructions to its transfer agent with respect to the Restricted Stock. The Company shall notify the transfer agent as and when the Restrictions lapse.

2.3    Consideration to the Company. In consideration of the grant of the Award pursuant hereto, the Participant agrees to render faithful and efficient services to the Company or any Subsidiary.

ARTICLE III.

OTHER PROVISIONS

3.1    Section 83(b) Election. If the Participant makes an election under Section 83(b) of the Code to be taxed with respect to the Restricted Stock as of the date of transfer of the Restricted Stock rather than as of the date or dates upon which the Participant would otherwise be taxable under Section 83(a) of the Code, the Participant hereby agrees to deliver a copy of such election to the Company promptly after filing such election with the Internal Revenue Service.

3.2    Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon the Participant, the Company and all other interested persons. No member of the Administrator or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the Award.

3.3    Restricted Stock Not Transferable. Until the Restrictions hereunder lapse or expire pursuant to this Agreement and the Shares vest, the Restricted Stock (including any Shares or other

 

A-2


securities or property received by the Participant with respect to Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall be subject to the restrictions on transferability set forth in Section 10.1 of the Plan.

3.4    Rights as Stockholder. Except as otherwise provided herein, upon the Grant Date, the Participant shall have all the rights of a stockholder of the Company with respect to the Shares, subject to the Restrictions, including, without limitation, voting rights and rights to receive any cash or stock dividends, in respect of the Shares subject to the Award and deliverable hereunder.

3.5    Tax Consultation. The Participant understands that the Participant may suffer adverse tax consequences in connection with the Restricted Stock granted pursuant to this Agreement (and the Shares issuable with respect thereto). The Participant represents that the Participant has consulted with any tax consultants the Participant deems advisable in connection with the Restricted Stock and that the Participant is not relying on the Company for any tax advice.

3.6    Adjustments Upon Specified Events. The Administrator may accelerate the vesting of the Restricted Stock in such circumstances as it, in its sole discretion, may determine. The Participant acknowledges that the Restricted Stock is subject to adjustment, modification and termination in certain events as provided in this Agreement and Article IX of the Plan.

3.7    Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at the Participant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 3.7, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.8    Participant’s Representations. If the Shares issuable hereunder have not been registered under the Securities Act or any applicable state laws on an effective registration statement at the time of such issuance, the Participant shall, if required by the Company, concurrently with such issuance, make such written representations as are deemed necessary or appropriate by the Company and/or its counsel.

3.9    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.10    Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

3.11    Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act, and any and all Applicable Law. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Award is granted, only in such a manner as to conform to such Applicable Law. To the extent permitted by Applicable Law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law.

3.12    Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board; provided, however, that, except as may

 

A-3


otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the Award in any material way without the prior written consent of the Participant.

3.13    Successors and Assigns. The Company or any Subsidiary may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company and its Subsidiaries. Subject to the restrictions on transfer set forth in Section 3.3 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

3.14    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, then the Plan, the Award and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.15    Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an Employee or other service provider of the Company or any of its Subsidiaries or shall interfere with or restrict in any way the rights of the Company and its Subsidiaries, which rights are hereby expressly reserved, to discharge or terminate the services of the Participant at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in a written agreement between the Company or a Subsidiary and the Participant.

3.16    Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto, if any) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and its Subsidiaries and the Participant with respect to the subject matter hereof.

3.17    Limitation on the Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general unsecured creditor of the Company and its Subsidiaries with respect to amounts credited and benefits payable, if any, with respect to the Shares issuable hereunder.

 

A-4

Exhibit 10.2(d)

BERKELEY LIGHTS, INC.

2020 INCENTIVE AWARD PLAN

RESTRICTED STOCK UNIT AWARD GRANT NOTICE

Berkeley Lights, Inc., a Delaware corporation, (the “Company”), pursuant to its 2020 Incentive Award Plan, as amended from time to time (the “Plan”), hereby grants to the holder listed below (the “Participant”), an award of restricted stock units (“Restricted Stock Units or RSUs”). Each vested Restricted Stock Unit represents the right to receive, in accordance with the Restricted Stock Unit Award Agreement attached hereto as Exhibit A (the “Agreement”), one share of Common Stock (“Share”). This award of Restricted Stock Units is subject to all of the terms and conditions set forth herein and in the Agreement and the Plan, each of which are incorporated herein by reference, including all exhibits and attachments thereto. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and the Agreement.

 

Participant:

   [                                                 ]

Grant Date:

   [                                                 ]

Total Number of RSUs:

   [                            ]

Vesting Commencement Date:

   [                            ]

Vesting Schedule:

   [                            ]

Termination:

   If the Participant experiences a Termination of Service, all RSUs that have not become vested on or prior to the date of such Termination of Service will thereupon be automatically forfeited by the Participant without payment of any consideration therefor.

By his or her signature and the Company’s signature below, the Participant agrees to be bound by the terms and conditions of the Plan, the Agreement and this Grant Notice. The Participant has reviewed the Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Agreement and the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan, this Grant Notice or the Agreement. In addition, by signing below, the Participant also agrees that the Company, in its sole discretion, may satisfy any withholding obligations in accordance with Section 2.6(b) of the Agreement by (i) withholding shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs, (ii) instructing a broker on the Participant’s behalf to sell shares of Common Stock otherwise issuable to the Participant upon vesting of the RSUs and submit the proceeds of such sale to the Company, or (iii) using any other method permitted by Section 2.6(b) of the Agreement or the Plan.

 

 

BERKELEY LIGHTS, INC.:

    PARTICIPANT:  

By:

 

                                             

  By:  

                                             

Print Name:

 

                                             

  Print Name:  

                                             

Title:

 

                                             

   

Address:

 

                                             

  Address:  

                                             


EXHIBIT A

TO RESTRICTED STOCK UNIT AWARD GRANT NOTICE

RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”) to which this Restricted Stock Unit Award Agreement (this “Agreement”) is attached, Berkeley Lights, Inc., a Delaware corporation (the “Company”), has granted to the Participant the number of restricted stock units (“Restricted Stock Units or RSUs”) set forth in the Grant Notice under the Company’s 2020 Incentive Award Plan, as amended from time to time (the “Plan”). Each Restricted Stock Unit represents the right to receive one share of Common Stock (a “Share”) upon vesting.

ARTICLE I.

GENERAL

1.1    Defined Terms. Capitalized terms not specifically defined herein shall have the meanings specified in the Plan and Grant Notice.

1.2    Incorporation of Terms of Plan. The RSUs are subject to the terms and conditions of the Plan, which are incorporated herein by reference. In the event of any inconsistency between the Plan and this Agreement, the terms of the Plan shall control. If the Non-U.S. Provisions (as defined in Article 3) apply to Participant, in the event of a conflict between the terms of this Agreement or the Plan and the Non-U.S. Provisions, the terms of the Non-U.S. Provisions shall control.

ARTICLE II.

GRANT OF RESTRICTED STOCK UNITS

2.1    Grant of RSUs. Pursuant to the Grant Notice and upon the terms and conditions set forth in the Plan and this Agreement, effective as of the Grant Date set forth in the Grant Notice, the Company hereby grants to the Participant an award of RSUs under the Plan in consideration of the Participant’s past and/or continued employment with or service to the Company or any Subsidiaries and for other good and valuable consideration.

2.2    Unsecured Obligation to RSUs. Unless and until the RSUs have vested in the manner set forth in Article 2 hereof, the Participant will have no right to receive Common Stock under any such RSUs. Prior to actual payment of any vested RSUs, such RSUs will represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

2.3    Vesting Schedule. Subject to Section 2.5 hereof, the RSUs shall vest and become nonforfeitable with respect to the applicable portion thereof according to the vesting schedule set forth in the Grant Notice (rounding down to the nearest whole Share).

2.4    Consideration to the Company. In consideration of the grant of the award of RSUs pursuant hereto, the Participant agrees to render faithful and efficient services to the Company or any Subsidiary.

2.5    Forfeiture, Termination and Cancellation upon Termination of Service. Notwithstanding any contrary provision of this Agreement or the Plan, upon the Participant’s Termination of Service for any or no reason, all Restricted Stock Units which have not vested prior to or in connection

 

A-1


with such Termination of Service shall thereupon automatically be forfeited, terminated and cancelled as of the applicable termination date without payment of any consideration by the Company, and the Participant, or the Participant’s beneficiary or personal representative, as the case may be, shall have no further rights hereunder. No portion of the RSUs which has not become vested as of the date on which the Participant incurs a Termination of Service shall thereafter become vested.

2.6    Issuance of Common Stock upon Vesting.

(a)    As soon as administratively practicable following the vesting of any Restricted Stock Units pursuant to Section 2.3 hereof, but in no event later than thirty (30) days after such vesting date (for the avoidance of doubt, this deadline is intended to comply with the “short term deferral” exemption from Section 409A of the Code), the Company shall deliver to the Participant (or any transferee permitted under Section 3.2 hereof) a number of Shares equal to the number of RSUs subject to this Award that vest on the applicable vesting date. Notwithstanding the foregoing, in the event Shares cannot be issued pursuant to Section 10.7 of the Plan, the Shares shall be issued pursuant to the preceding sentence as soon as administratively practicable after the Administrator determines that Shares can again be issued in accordance with such Section.

(b)    As set forth in Section 10.5 of the Plan, the Company shall have the authority and the right to deduct or withhold, or to require the Participant to remit to the Company, an amount sufficient to satisfy all applicable foreign, federal, state and local taxes and/or social security, social insurance or national insurance contributions required by law to be withheld with respect to any taxable event arising in connection with the Restricted Stock Units. The Company shall not be obligated to deliver any Shares to the Participant or the Participant’s legal representative unless and until the Participant or the Participant’s legal representative shall have paid or otherwise satisfied in full the amount of all foreign, federal, state and local taxes and/or social security, social insurance or national insurance contributions applicable to the taxable income of the Participant resulting from the grant or vesting of the Restricted Stock Units or the issuance of Shares.

2.7    Conditions to Delivery of Shares. The Shares deliverable hereunder may be either previously authorized but unissued Shares, treasury Shares or issued Shares which have then been reacquired by the Company. Such Shares shall be fully paid and nonassessable. The Company shall not be required to issue Shares deliverable hereunder prior to fulfillment of the conditions set forth in Section 10.7 of the Plan.

2.8    Rights as Stockholder. The holder of the RSUs shall not be, nor have any of the rights or privileges of, a stockholder of the Company, including, without limitation, voting rights and rights to dividends, in respect of the RSUs and any Shares underlying the RSUs and deliverable hereunder unless and until such Shares shall have been issued by the Company and held of record by such holder (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company). No adjustment shall be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Article IX of the Plan.

ARTICLE III.

OTHER PROVISIONS

3.1    Administration. The Administrator shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding

 

A-2


upon the Participant, the Company and all other interested persons. No member of the Administrator or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan, this Agreement or the RSUs.

3.2    RSUs Not Transferable. The RSUs shall be subject to the restrictions on transferability set forth in Section 10.1 of the Plan.

3.3    Tax Consultation. The Participant understands that the Participant may suffer adverse tax consequences in connection with the RSUs granted pursuant to this Agreement (and the Shares issuable with respect thereto). The Participant represents that the Participant has consulted with any tax consultants the Participant deems advisable in connection with the RSUs and the issuance of Shares with respect thereto and that the Participant is not relying on the Company for any tax advice.

3.4    Binding Agreement. Subject to the limitation on the transferability of the RSUs contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

3.5    Adjustments Upon Specified Events. The Administrator may accelerate the vesting of the RSUs in such circumstances as it, in its sole discretion, may determine. The Participant acknowledges that the RSUs are subject to adjustment, modification and termination in certain events as provided in this Agreement and Article IX of the Plan.

3.6    Notices. Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s principal office, and any notice to be given to the Participant shall be addressed to the Participant at the Participant’s last address reflected on the Company’s records. By a notice given pursuant to this Section 3.6, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service (or any similar foreign entity).

3.7    Participant’s Representations. If the Shares issuable hereunder have not been registered under the Securities Act or any applicable state laws on an effective registration statement at the time of such issuance, the Participant shall, if required by the Company, concurrently with such issuance, make such written representations as are deemed necessary or appropriate by the Company and/or its counsel.

3.8    Titles. Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.9    Governing Law. The laws of the State of Delaware shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws.

3.10    Conformity to Securities Laws. The Participant acknowledges that the Plan and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any other Applicable Law. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the RSUs are granted, only in such a manner as to conform to Applicable Law. To the extent permitted by Applicable Law, the Plan and this Agreement shall be deemed amended to the extent necessary to conform to such Applicable Law.

 

A-3


3.11    Amendment, Suspension and Termination. To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Administrator or the Board; provided, however, that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall adversely affect the RSUs in any material way without the prior written consent of the Participant.

3.12    Successors and Assigns. The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth in Section 3.2 hereof, this Agreement shall be binding upon the Participant and his or her heirs, executors, administrators, successors and assigns.

3.13    Limitations Applicable to Section 16 Persons. Notwithstanding any other provision of the Plan or this Agreement, if the Participant is subject to Section 16 of the Exchange Act, then the Plan, the RSUs and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by Applicable Law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.14    Not a Contract of Service Relationship. Nothing in this Agreement or in the Plan shall confer upon Participant any right to continue to serve as an employee or other service provider of the Company or any of its Subsidiaries or interfere with or restrict in any way with the right of the Company or any of its Subsidiaries, which rights are hereby expressly reserved, to discharge or to terminate for any reason whatsoever, with or without cause, the services of the Participant at any time (unless otherwise required by applicable law or any service agreement by and between Participant and Participant’s employer).

3.15    Entire Agreement. The Plan, the Grant Notice and this Agreement (including all Exhibits thereto, if any) constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and the Participant with respect to the subject matter hereof.

3.16    Section 409A. This Award is not intended to constitute “nonqualified deferred compensation” within the meaning of Section 409A of the Code (together with any Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the date hereof, “Section 409A”). However, notwithstanding any other provision of the Plan, the Grant Notice or this Agreement, if at any time the Administrator determines that this Award (or any portion thereof) may be subject to Section 409A, the Administrator shall have the right in its sole discretion (without any obligation to do so or to indemnify Participant or any other person for failure to do so) to adopt such amendments to the Plan, the Grant Notice or this Agreement, or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions, as the Administrator determines are necessary or appropriate for this Award either to be exempt from the application of Section 409A or to comply with the requirements of Section 409A.

3.17    Limitation on Participant’s Rights. Participation in the Plan confers no rights or interests other than as herein provided. This Agreement creates only a contractual obligation on the part of the Company as to amounts payable and shall not be construed as creating a trust. Neither the Plan nor any underlying program, in and of itself, has any assets. The Participant shall have only the rights of a general

 

A-4


unsecured creditor of the Company and its Subsidiaries with respect to amounts credited and benefits payable, if any, with respect to the RSUs, and rights no greater than the right to receive the Common Stock as a general unsecured creditor with respect to RSUs, as and when payable hereunder.

3.18    Data Privacy. Without limiting any other provisions of this Agreement, Section 11.8 (“Data Privacy”) of the Plan is hereby incorporated into this Agreement as if first set forth herein. If Participant resides in the UK or the European Union, the Company and its Subsidiaries and affiliates will hold, collect and otherwise process certain data as set out in the applicable company’s GDPR-compliant data privacy notice, which will be or has been provided to you separately. All personal data will be treated in accordance with applicable data protection laws and regulations.

3.19    Special Provisions for RSUs Granted to Participants Outside the U.S. If Participant performs services for the Company outside of the United States, the RSUs shall be subject to the special provisions, if any, for Participant’s country of residence, as set forth in Exhibit A-1 (the “Non-U.S. Provisions”). If Participant relocates to one of the countries included in the Non-U.S. Provisions during the life of the Award, the special provisions for such country shall apply to Participant, to the extent the Company determines that the application of such provisions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. The Company reserves the right to impose other requirements on the RSUs and the Shares issuable upon vesting of the RSUs, to the extent the Company determines it is necessary or advisable in order to comply with local laws or facilitate the administration of the Plan, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

3.20    Acknowledgment of Nature of Plan and RSUs. In accepting the RSUs, Participant acknowledges that:

(a)    for labor law purposes, the RSUs and the Shares subject to the RSUs are an extraordinary item that does not constitute wages of any kind for services of any kind rendered to the Company or to Participant’s service entity, and the award of the RSUs is outside the scope of Participant’s service contract, if any;

(b)    for labor law purposes, the RSUs and the Shares subject to the RSUs are not part of normal or expected wages or salary for any purposes, including, but not limited to, calculation of any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, holiday pay, long-service awards, pension or retirement benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company, the Participant’s employer, its parent, or any Subsidiary or affiliate of the Company;

(c)    the RSUs and the Shares subject to the RSUs are not intended to replace any pension rights or compensation;

(d)    neither the RSUs nor any provision of this Agreement, the Plan or the policies adopted pursuant to the Plan confer upon Participant any right with respect to service or continuation of current service and shall not be interpreted to form a service contract or relationship with the Company or any subsidiary or affiliate;

(e)    the future value of the underlying Shares is unknown and cannot be predicted with certainty; and

 

A-5


(f)    the value of the Shares acquired upon vesting of the RSUs may increase or decrease in value.

*    *    *    *    *

 

A-6


EXHIBIT A-1

TO RESTRICTED STOCK UNIT AWARD AGREEMENT

SPECIAL PROVISIONS FOR PARTICIPANTS OUTSIDE THE UNITED STATES

This Exhibit A-1 (this “Appendix”) includes special terms and conditions applicable to Participants in the countries below. These terms and conditions are in addition to those set forth in the Restricted Stock Unit Award Agreement (the “Agreement”) and the Plan and to the extent there are any inconsistencies between these terms and conditions and those set forth in the Agreement, these terms and conditions shall prevail. Any capitalized term used in this Exhibit A-1 without definition shall have the meaning ascribed to such term in the Plan or the Agreement, as applicable.

This Appendix also includes information relating to exchange control and other issues of which Participant should be aware with respect to his or her participation in the Plan. The information is based on the exchange control, securities and other laws in effect in the respective countries as of June 2020. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Participant not rely on the information herein as the only source of information relating to the consequences of participation in the Plan because the information may be out of date at the time RSUs vest or Shares acquired under the Plan are sold.

In addition, the information is general in nature and may not apply to the particular situation of Participant, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant is advised to seek appropriate professional advice as to how the relevant laws in his or her country may apply to his or her situation. Finally, if Participant is a citizen or resident of a country other than the one in which he or she is currently working, the information contained herein may not be applicable to Participant.

FRANCE

Securities Law. This offer does not require a prospectus to be submitted for approval to the Autorité des Marchés Financiers (“AMF”). Participant may take part in the offer solely for his or her own account and any financial instruments thus acquired cannot be distributed directly or indirectly to the public otherwise than in accordance with Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the Monetary and Financial Code. The information provided to Participant in this Agreement, the Plan or other documents supplied to Participant in connection with the offer to Participant of the RSUs are provided as factual information only and as such is not intended to induce Participant to accept to enter into this Agreement. Any such information does not give or purport to give any indication of the likely future financial success or performance of the Company and historical financial information gives no indication of future financial performance. The RSUs are not intended to qualify for any favorable tax and social security treatment in France. Should Participant be in any doubt as to the contents of the offer of the RSUs or what course of action to take in relation to the offer, Participant is recommended to immediately seek his or her own personal financial advice from his or her stockbroker, bank manager, solicitor, accountant or other independent financial advisor duly authorized by the competent authorities or bodies.

Exchange Control Information. Participant must declare to the customs and excise authorities any cash and securities the Participant imports or exports without the use of a financial institution when the value of such cash or securities exceeds a certain amount. Participant should consult with Participant’s professional advisor. In addition, if the Participant is a French resident, the Participant may hold stock outside France provided Participant declares all foreign bank and brokerage accounts on an annual basis (including the accounts that were open and those that were closed during the tax year) on a specific form in Participant’s income tax return.

 

A-1-1


French Language Provision. By signing and returning this Agreement, Participant confirms having read and understood the documents relating to the Plan which were provided to Participant in English language. The Participant accepts the terms of those documents accordingly.

En signant et renvoyant ce Contrat vous confirmez ainsi avoir lu et compris les documents relatifs au Plan qui vous ont été communiqués en langue anglaise. Vous en acceptez les termes en connaissance de cause.

GERMANY

Exchange Control Information. Cross-border payments in excess of €12,500 must be reported monthly to the German Federal Bank. If Participant uses a German bank to transfer a cross-border payment in excess of €12,500 in connection with the sale of Shares acquired under the Plan, the bank will make the report for Participant. In addition, Participant must report any receivables, payables, or debts in foreign currency exceeding an amount of €5,000,000 on a monthly basis. Finally, Participant must report on an annual basis if Participant holds Shares that exceed 10% of the total voting capital of the Company.

SWITZERLAND

Securities Law Information. The RSUs are considered a private offering in Switzerland; therefore, it is not subject to registration.

UNITED KINGDOM

Definitions

The phrases “termination of service” or “termination of employment” as used in the Plan and the Agreement shall mean the Participant’s Termination of Employment. For this purpose, “Termination of Employment” means the time when the employee-employer relationship between the Participant and the Company or any subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding terminations where there is a simultaneous reemployment or continuing employment of the Participant by the Company or any subsidiary. The Administrator, in its absolute discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a particular leave of absence constitutes a Termination of Employment.

Participants

The Agreement as amended pursuant to this Exhibit A-1 forms the rules of the employee share scheme applicable to the United Kingdom-based Participants of the Company and any Subsidiaries. Only employees of the Company or any subsidiary are eligible to be granted RSUs or be issued Shares under the Agreement. Other service providers (including consultants or non-employee directors) who are not employees are not eligible to receive RSUs under the Agreement in the United Kingdom. Accordingly, all references in the Agreement to the Participant’s service or termination of service shall be interpreted as references to the Participant’s employment or Termination of Employment.

The following provision shall be added to the Agreement:

Not a Contract of Employment. Nothing in this Agreement or in the Plan shall confer upon the Participant any right to continue to serve as an employee of the Company or any of its subsidiaries and the grant of the RSUs does not form part of the Participant’s entitlement to remuneration or benefits in terms of his employment with the Company or any subsidiary.

 

A-1-2


Terms and Conditions

Special Tax Consequences.

 

(a)

Participant agrees to indemnify and keep indemnified the Company, any subsidiary and the Participant’s employer (the “Employer”), if different, from and against any liability for or obligation to pay any Tax Liability (a “Tax Liability” being any liability for income tax, withholding tax and any other employment related taxes, employee’s national insurance contributions or employer’s national insurance contributions or equivalent social security contributions in any jurisdiction) that is attributable to (1) the grant or settlement of, or any benefit derived by the Participant from, the RSUs, (2) the Participant’s acquisition of Shares upon settlement of the RSUs, or (3) the disposal of any Shares.

 

(b)

The RSUs cannot be settled until the Participant has made such arrangements as the Company may require for the satisfaction of any Tax Liability that may arise in connection with the vesting and settlement of the RSUs and/or the Participant’s acquisition of the Shares. The Company shall not be required to issue, allot or transfer Shares until the Participant has satisfied this obligation.

 

(c)

At the discretion of the Company, the RSUs cannot be settled until the Participant has entered into an election with the Company or the Employer (as appropriate) in a form approved by the Company and Her Majesty’s Revenue & Customs (a “Joint Election”) under which any liability of the Company and/or the Employer for Employer’s national insurance contributions arising in respect of the granting, vesting, settlement of or other dealing in the RSUs, or the acquisition of Shares on the settlement of the RSUs, is transferred to and met by the Participant.

Tax and National Insurance Contributions Acknowledgment. The Participant agrees that if the Participant does not pay or the Employer or the Company does not withhold from the Participant, the full amount of all taxes applicable to the taxable income resulting from the grant of the RSUs, the vesting of the RSUs, or the issuance of Shares (the “Tax-Related Items”) that Participant owes due to the vesting of the RSUs, or the release or assignment of the RSUs for consideration, or the receipt of any other benefit in connection with the RSUs (the “Taxable Event”) by 90 days after the end of the tax year in which the Taxable Event occurred, then the amount that should have been withheld shall constitute a loan owed by the Participant to the Employer, effective 90 days after the end of the tax year in which the Taxable Event occurred. The Participant agrees that the loan will bear interest at the HMRC’s official rate and will be immediately due and repayable by the Participant, and the Company and/or the Employer may recover it at any time thereafter by withholding the funds from salary, bonus or any other funds due to the Participant by the Employer, by withholding in Shares issued upon vesting and settlement of the RSUs or from the cash proceeds from the sale of Shares or by demanding cash or a cheque from the Participant. The Participant also authorizes the Company to delay the issuance of any Shares to the Participant unless and until the loan is repaid in full.

Notwithstanding the foregoing, if the Participant is an officer or executive director (as within the meaning of Section 13(k) of the Exchange Act), the terms of the immediately foregoing provision will not apply. In the event that the Participant is an officer or executive director and Tax-Related Items are not collected from or paid by the Participant within 90 days of the Taxable Event, the amount of any uncollected Tax-Related Items may constitute a benefit to the Participant on which additional income tax and national insurance contributions may be payable. The Participant acknowledges that the Company or the Employer may recover any such additional income tax and national insurance contributions at any time thereafter by any of the means referred to in Section 10.5 of the Plan.

 

A-1-3


References to “withholding tax” in the Agreement shall include social insurance contributions including primary and secondary class 1 national insurance contributions.

 

A-1-4

Exhibit 10.3

BERKELEY LIGHTS, INC.

2020 EMPLOYEE STOCK PURCHASE PLAN

ARTICLE I.

PURPOSE

The Plan’s purpose is to assist employees of the Company and its Designated Subsidiaries in acquiring a stock ownership interest in the Company, and to help such employees provide for their future security and to encourage them to remain in the employment of the Company and its Subsidiaries.

The Plan consists of two components: the Section 423 Component and the Non-Section 423 Component. The Section 423 Component is intended to qualify as an “employee stock purchase plan” under Section 423 of the Code and shall be administered, interpreted and construed in a manner consistent with the requirements of Section 423 of the Code. In addition, this Plan authorizes the grant of Options under the Non-Section 423 Component, which need not qualify as Options granted pursuant to an “employee stock purchase plan” under Section 423 of the Code; such Options granted under the Non-Section 423 Component shall be granted pursuant to separate Offerings containing such sub-plans, appendices, rules or procedures as may be adopted by the Administrator and designed to achieve tax, securities laws or other objectives for Eligible Employees and the Designated Subsidiaries in locations outside of the United States. Except as otherwise provided herein, the Non-Section 423 Component will operate and be administered in the same manner as the Section 423 Component. Offerings intended to be made under the Non-Section 423 Component will be designated as such by the Administrator at or prior to the time of such Offering.

For purposes of this Plan, the Administrator may designate separate Offerings under the Plan, the terms of which need not be identical, in which Eligible Employees will participate, even if the dates of the applicable Offering Period(s) in each such Offering is identical, provided that the terms of participation are the same within each separate Offering under the Section 423 Component as determined under Section 423 of the Code. Solely by way of example and without limiting the foregoing, the Company could, but shall not be required to, provide for simultaneous Offerings under the Section 423 Component and the Non-Section 423 Component of the Plan.

ARTICLE II.

DEFINITIONS

As used in the Plan, the following words and phrases have the meanings specified below, unless the context clearly indicates otherwise:

2.1     “Administrator” means the Committee, or such individuals to which authority to administer the Plan has been delegated under Section 7.1 hereof.

2.2    “Agent” means the brokerage firm, bank or other financial institution, entity or person(s), if any, engaged, retained, appointed or authorized to act as the agent of the Company or an Employee with regard to the Plan.

2.3    “Board” means the Board of Directors of the Company.

2.4    “Code” means the U.S. Internal Revenue Code of 1986, as amended, and all regulations, guidance, compliance programs and other interpretative authority issued thereunder.


2.5    “Committee” means the Compensation Committee of the Board.

2.6    “Common Stock” means the common stock of the Company.

2.7    “Company” means Berkeley Lights, Inc., a Delaware corporation, or any successor.

2.8    “Compensation” of an Employee means the regular earnings or base salary, paid to the Employee from the Company on each Payday as compensation for services to the Company or any Designated Subsidiary, before deduction for any salary deferral contributions made by the Employee to any tax-qualified or nonqualified deferred compensation plan, including overtime, shift differentials, vacation pay, salaried production schedule premiums, holiday pay, jury duty pay, funeral leave pay, paid time off, military pay, and prior week adjustments, but excluding bonuses, commissions, education or tuition reimbursements, imputed income arising under any group insurance or benefit program, travel expenses, business and moving reimbursements, including tax gross ups and taxable mileage allowance, income received in connection with any stock options, restricted stock, restricted stock units or other compensatory equity awards and all contributions made by the Company or any Designated Subsidiary for the Employee’s benefit under any employee benefit plan now or hereafter established. For any Participants in non-U.S. jurisdictions, any equivalent amounts of the foregoing compensation shall be determined by the Administrator. Such Compensation shall be calculated before deduction of any income or employment tax withholdings, but shall be withheld from the Employee’s net income.

2.9    “Designated Subsidiary” means each Subsidiary that has been designated by the Board or Committee from time to time in its sole discretion as eligible to participate in the Plan, including any Subsidiary in existence on the Effective Date and any Subsidiary formed or acquired following the Effective Date, in accordance with Section 7.2 hereof, such designation to specify whether such participation is in the Section 423 Component or Non-Section 423 Component. A Designated Subsidiary may participate in either the Section 423 Component or Non-Section 423 Component, but not both. The designation by the Administrator of Designated Subsidiaries and changes in such designations by the Administrator shall not require stockholder approval. Only Subsidiary Corporations may be designated as Designated Subsidiaries for purposes of the Section 423 Component, and if an entity does not so qualify, it shall automatically be deemed to be a Designated Subsidiary in the Non-Section 423 Component.

2.10    “Effective Date” means the date immediately prior to the Public Trading Date, provided that the Board has adopted the Plan prior to or on such date, subject to approval of the Plan by the Company’s stockholders in accordance with Section 7.7 hereof.

2.11     “Eligible Employee” means an Employee of the Company or a Designated Subsidiary who does not, immediately after any rights under this Plan are granted, own (directly or through attribution) stock possessing 5% or more of the total combined voting power or value of all classes of Common Stock or other stock of the Company, a Parent or a Subsidiary Corporation (as determined under Section 423(b)(3) of the Code). For purposes of the foregoing sentence, the rules of Section 424(d) of the Code with regard to the attribution of stock ownership shall apply in determining the stock ownership of an individual, and stock that an Employee may purchase under outstanding options shall be treated as stock owned by the Employee; provided, however, that the Administrator may provide in an Offering Document that an Employee shall not be eligible to participate in an Offering if: (a) such Employee’s customary employment is for twenty hours or less per week; (b) such Employee’s customary employment is for less than five months in any calendar year; (c) such Employee is a highly compensated employee within the meaning of Section 423(b)(4)(D) of the Code, (d) such Employee has not met a service requirement designated by the Administrator pursuant to Section 423(b)(4)(A) of the

 

2


Code (which service requirement may not exceed two years), and/or (e) such Employee is a citizen or resident of a foreign jurisdiction if the grant of a right to purchase Stock under the Plan to such Employee would be prohibited under the laws of such foreign jurisdiction or the grant of an option to such Employee in compliance with the laws of such foreign jurisdiction would cause the Section 423 Component, any Offering or any purchase right to violate the requirements of Section 423 of the Code, as determined by the Administrator in its sole discretion; provided, further, that any exclusion in clauses (a), (b), (c), (d) or (e) shall be applied in an identical manner under each Offering to all Employees of the Designated Subsidiaries in such Offering, in accordance with Treasury Regulation Section 1.423-2(e). With respect to the Non-Section 423 Component, all of the foregoing rules shall apply in determining who is an “Eligible Employee,” except (A) the Administrator may limit eligibility further within a Designated Subsidiary so as to only designate some Employees of a Designated Subsidiary as Eligible Employees, and (B) to the extent the foregoing eligibility rules are not consistent with applicable local laws.

2.12    “Employee” means an individual who renders services to a Designated Subsidiary in the status of an employee, and, with respect to the Section 423 Component, a person who is an officer or other employee (as defined in accordance with Section 3401(c) of the Code) of the Company or any Designated Subsidiary. The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s attainment or termination of such status. For purposes of an individual’s participation in, or other rights under the Plan, all such determinations by the Company shall be final, binding and conclusive, notwithstanding that any court of law or governmental agency subsequently makes a contrary determination. For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company or a Designated Subsidiary (which, for purposes of the Section 423 Component, must meet the requirements of Treasury Regulation Section 1.421-7(h)(2)). For purposes of the Section 423 Component, where the period of an approved leave of absence exceeds three months, or such other period specified in Treasury Regulation Section 1.421-1(h)(2), and the individual’s right to reemployment is not provided either by statute or contract, the employment relationship shall be deemed to have terminated for purposes of the Plan on the first day immediately following such three-month period, or such other period specified in Treasury Regulation Section 1.421-1(h)(2).

2.13    “Enrollment Date” means the first date of each Offering Period.

2.14    “Exercise Date” means the last day of each Purchase Period, except as provided in Section 5.2 hereof.

2.15    “Exchange Act” means the Securities Exchange Act of 1934, as amended.

2.16    “Fair Market Value” means, as of any date, the value of Common Stock determined as follows:

(a)    If the Common Stock is (i) listed on any established securities exchange (such as the New York Stock Exchange, the NASDAQ Global Market or the NASDAQ Global Select Market), (ii) listed on any national market system or (iii) listed, quoted or traded on any automated quotation system, its Fair Market Value shall be the closing sales price for a share of Common Stock as quoted on such exchange or system for such date or, if there is no closing sales price for a share of Common Stock on the date in question, the closing sales price for a share of Common Stock on the last preceding date for which such quotation exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

3


(b)    If the Common Stock is not listed on an established securities exchange, national market system or automated quotation system, but the Common Stock is regularly quoted by a recognized securities dealer, its Fair Market Value shall be the mean of the high bid and low asked prices for such date or, if there are no high bid and low asked prices for a share of Common Stock on such date, the high bid and low asked prices for a share of Common Stock on the last preceding date for which such information exists, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

(c)    If the Common Stock is neither listed on an established securities exchange, national market system or automated quotation system nor regularly quoted by a recognized securities dealer, its Fair Market Value shall be established by the Administrator in good faith.

2.17    “Grant Date” means the first day of an Offering Period.

2.18     “New Exercise Date” has the meaning set forth in Section 5.2(b) hereof.

2.19    “Non-Section 423 Component” means those Offerings under the Plan, together with the sub-plans, appendices, rules or procedures, if any, adopted by the Administrator as a part of this Plan, in each case, pursuant to which Options may be granted to non-U.S. Eligible Employees that need not satisfy the requirements for Options granted pursuant to an “employee stock purchase plan” that are set forth under Section 423 of the Code.

2.20    “Offering” means an offer under the Plan of an Option that may be exercised during an Offering Period as further described in Section 4 hereof. Unless otherwise specified by the Administrator, each Offering to the Eligible Employees of the Company or a Designated Subsidiary shall be deemed a separate Offering, even if the dates and other terms of the applicable Offering Periods of each such Offering are identical and the provisions of the Plan will separately apply to each Offering. To the extent permitted by Treas. Reg. § 1.423-2(a)(1), the terms of each separate Offering under the Section 423 Component need not be identical, provided that the terms of the Section 523 Component and an Offering thereunder together satisfy Treas. Reg. § 1.423-2(a)(2) and (a)(3).

2.21    “Offering Period” means such period of time commencing on such date(s) as determined by the Board or Committee, in its sole discretion, and with respect to which Options shall be granted to Participants. The duration and timing of Offering Periods may be established or changed by the Board or Committee at any time, in its sole discretion. Notwithstanding the foregoing, in no event may an Offering Period exceed 27 months.

2.22    “Option” means the right to purchase shares of Common Stock pursuant to the Plan during each Offering Period.

2.23    “Option Price” means the purchase price of a share of Common Stock hereunder as provided in Section 4.2 hereof.

2.24    “Parent” means any entity that is a parent corporation of the Company within the meaning of Section 424 of the Code.

2.25    “Participant” means any Eligible Employee who elects to participate in the Plan.

2.26    “Payday” means the regular and recurring established day for payment of Compensation to an Employee of the Company or any Designated Subsidiary.

 

4


2.27    “Plan” means this 2020 Employee Stock Purchase Plan, including both the Section 423 Component and Non-Section 423 Component and any other sub-plans or appendices hereto, as amended from time to time.

2.28    “Purchase Period” means such period of time within an Offering Period commencing on such date(s) as determined by the Board or Committee, in its sole discretion. The duration and timing of Purchase Periods may be established or changed by the Board or Committee at any time, in its sole discretion. Notwithstanding the foregoing, in no event may a Purchase Period exceed the duration of the Offering Period under which it is established.

2.29    “Plan Account” means a bookkeeping account established and maintained by the Company in the name of each Participant.

2.30    “Section 423 Component” means those Offerings under the Plan that are intended to meet the requirements under Section 423(b) of the Code.

2.31    “Subsidiary” shall mean (a) any Subsidiary Corporation, and (b) with respect to any Offering pursuant to the Non-Section 423 Component only, Subsidiary may also include any corporate or noncorporate entity in which the Company has a direct or indirect equity interest or significant business relationship.

2.32    “Subsidiary Corporation” shall mean any corporation, other than the Company, in an unbroken chain of corporations beginning with the Company if, at the time of the determination, each of the corporations other than the last corporation in an unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain, or any other entity that is a subsidiary corporation of the Company within the meaning of Section 424 of the Code.

2.33    “Withdrawal Election” has the meaning set forth in Section 6.1(a) hereof.

ARTICLE III.

PARTICIPATION

3.1    Eligibility.

(a)    Any Eligible Employee who is employed by the Company or a Designated Subsidiary on a given Enrollment Date for an Offering Period shall be eligible to participate in the Plan during such Offering Period, subject to the requirements of Articles IV and V hereof, and, for the Section 423 Component, the limitations imposed by Section 423(b) of the Code.

No Eligible Employee shall be granted an Option under the Section 423 Component which permits the Participant’s rights to purchase shares of Common Stock under the Plan, and to purchase stock under all other employee stock purchase plans of the Company, any Parent or any Subsidiary subject to Section 423 of the Code, to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined at the time the option is granted) for each calendar year in which any such option granted to the Participant is outstanding at any time. The limitation under this Section 3.1(b) shall be applied in accordance with Section 423(b)(8) of the Code.

 

5


3.2    Election to Participate; Payroll Deductions

(a)    Except as provided in Section 3.3 hereof, an Eligible Employee may become a Participant in the Plan only by means of payroll deduction. Each individual who is an Eligible Employee as of an Offering Period’s Enrollment Date may elect to participate in such Offering Period and the Plan by delivering to the Company a payroll deduction authorization no later than the period of time prior to the applicable Enrollment Date that is determined by the Administrator, in its sole discretion.

(b)    Subject to Section 3.1(b) hereof and except as may otherwise be determined by the Administrator, payroll deductions (i) shall be equal to at least 1% of the Participant’s Compensation as of each Payday of the Offering Period following the Enrollment Date, but not more than 15% of the Participant’s Compensation as of each Payday of the Offering Period following the Enrollment Date; and (ii) will be expressed as a whole number percentage, or. Amounts deducted from a Participant’s Compensation with respect to an Offering Period pursuant to this Section 3.2 shall be deducted each Payday through payroll deduction and credited to the Participant’s Plan Account; provided that for the first Offering Period under this Plan, payroll deductions shall not begin until such date determined by the Administrator, in its sole discretion.

(c)    Unless otherwise determined by the Administrator, following at least one payroll deduction, a Participant may decrease (to as low as zero) the amount deducted from such Participant’s Compensation only once during an Offering Period upon ten calendar days’ prior written notice to the Company. Unless otherwise determined by the Administrator, a Participant may not increase the amount deducted from such Participant’s Compensation during an Offering Period.

(d)    Notwithstanding the foregoing, upon the termination of an Offering Period, each Participant in such Offering Period shall automatically participate in the immediately following Offering Period at the same payroll deduction percentage or fixed amount as in effect at the termination of the prior Offering Period, unless such Participant delivers to the Company a different election with respect to the successive Offering Period in accordance with Section 3.2(a) hereof, or unless such Participant becomes ineligible for participation in the Plan.

(e)    Notwithstanding any other provisions of the Plan to the contrary, in non-U.S. jurisdictions where participation in the Plan through payroll deductions is prohibited, the Administrator may provide that an Eligible Employee may elect to participate through contributions to the Participant’s account under the Plan in a form acceptable to the Administrator in lieu of or in addition to payroll deductions; provided, however, that, for any Offering under the Section 423 Component, the Administrator must determine that any alternative method of contribution is applied on an equal and uniform basis to all Eligible Employees in the Offering.

(f)    To determine which Designated Subsidiaries shall participate in the Non-Section 423 Component and which shall participate in the Section 423 Component.

3.3    Leave of Absence. During leaves of absence approved by the Company meeting the requirements of Treasury Regulation Section 1.421-1(h)(2), a Participant may continue participation in the Plan by making cash payments to the Company on his or her normal payday equal to his or her authorized payroll deduction.

 

6


ARTICLE IV.

PURCHASE OF SHARES

4.1    Grant of Option. The Company may make one or more Offerings under the Plan, which may be successive or overlapping with one another, until the earlier of: (i) the date on which the Shares available under the Plan have been sold or (ii) the date on which the Plan is suspended or terminates. The Administrator shall designate the terms and conditions of each Offering in writing, including without limitation, the Offering Period and the Purchase Periods. Each Participant shall be granted an Option with respect to an Offering Period on the applicable Grant Date. Subject to the limitations of Section 3.1(b) hereof, the number of shares of Common Stock subject to a Participant’s Option shall be determined by dividing (a) such Participant’s payroll deductions accumulated prior to an Exercise Date and retained in the Participant’s Plan Account on such Exercise Date by (b) the applicable Option Price; provided that in no event shall a Participant be permitted to purchase during each Offering Period more than 2,000 shares of Common Stock (subject to any adjustment pursuant to Section 5.2 hereof). The Administrator may, for future Offering Periods, increase or decrease, in its absolute discretion, the maximum number of shares of Common Stock that a Participant may purchase during such future Offering Periods. Each Option shall expire on the last Exercise Date for the applicable Offering Period immediately after the automatic exercise of the Option in accordance with Section 4.3 hereof, unless such Option terminates earlier in accordance with Article 6 hereof.

4.2    Option Price. The “Option Price” per share of Common Stock to be paid by a Participant upon exercise of the Participant’s Option on an Exercise Date for an Offering Period shall be equal to 85% of the lesser of the Fair Market Value of a share of Common Stock on (a) the applicable Grant Date and (b) the applicable Exercise Date; provided that in no event shall the Option Price per share of Common Stock be less than the par value per share of the Common Stock.

4.3    Purchase of Shares.

(a)    On the applicable Exercise Date for an Offering Period, each Participant shall automatically and without any action on such Participant’s part be deemed to have exercised his or her Option to purchase at the applicable per share Option Price the largest number of whole shares of Common Stock which can be purchased with the amount in the Participant’s Plan Account. Except as may otherwise by provided by the Administrator with respect to any Purchase Period or Offering period, any balance less than the per share Option Price that is remaining in the Participant’s Plan Account (after exercise of such Participant’s Option) as of the Exercise Date shall be carried forward to the next Purchase Period or Offering Period, unless the Participant has elected to withdraw from the Plan pursuant to Section 6.1 hereof or, pursuant to Section 6.2 hereof, such Participant has ceased to be an Eligible Employee. Any balance not carried forward to the next Purchase Period or Offering Period in accordance with the prior sentence shall be refunded to the applicable Participant as soon as practicable. For the avoidance of doubt, in no event shall an amount greater than or equal to the per share Option Price as of an Exercise Date be carried forward to the next Purchase Period or Offering Period.

(b)    As soon as practicable following the applicable Exercise Date, the number of shares of Common Stock purchased by such Participant pursuant to Section 4.3(a) hereof shall be delivered (either in share certificate or book entry form), in the Company’s sole discretion, to either (i) the Participant or (ii) an account established in the Participant’s name at a stock brokerage or other financial services firm designated by the Company. If the Company is required to obtain from any commission or agency authority to issue any such shares of Common Stock, the Company shall seek to obtain such authority. Inability of the Company to obtain from any such commission or agency authority which counsel for the Company deems necessary for the lawful issuance of any such shares shall relieve the Company from liability to any Participant except to refund to the Participant such Participant’s Plan

 

7


Account balance, without interest thereon. The Company may require that such shares of Common Stock be retained with a particular broker or agent for a designated period of time and/or may establish other procedures to permit tracking of qualifying and disqualifying dispositions of such shares of Common Stock

4.4    Automatic Termination of Offering Period. If the Fair Market Value of a share of Common Stock on any Exercise Date (except the final scheduled Exercise Date of any Offering Period) is lower than the Fair Market Value of a share of Common Stock on the Grant Date for an Offering Period, then such Offering Period shall terminate on such Exercise Date after the automatic exercise of the Option in accordance with Section 4.3 hereof, and each Participant shall automatically be enrolled in the Offering Period that commences immediately following such Exercise Date and such Participant’s payroll deduction authorization shall remain in effect for such Offering Period.

4.5    Transferability of Rights. An Option granted under the Plan shall not be transferable, other than by will or the applicable laws of descent and distribution, and is exercisable during the Participant’s lifetime only by the Participant. No option or interest or right to the Option shall be available to pay off any debts, contracts or engagements of the Participant or his or her successors in interest or shall be subject to disposition by pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempt at disposition of the Option shall have no effect.

ARTICLE V.

PROVISIONS RELATING TO COMMON STOCK

5.1    Common Stock Reserved. Subject to adjustment as provided in Section 5.2 hereof, the maximum number of shares of Common Stock that shall be made available for sale under the Plan shall be the sum of (a) 612,150 shares and (b) an annual increase on the first day of each year beginning in 2021 and ending in 2030 equal to the lesser of (i) one percent of the shares outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares as may be determined by the Board; provided, however, no more than 10,000,000 shares may be issued under the Plan. All or any portion of such maximum number of shares may be issued under the Section 423 Component. Shares made available for sale under the Plan may be authorized but unissued shares, treasury shares of Common Stock, or reacquired shares reserved for issuance under the Plan.

5.2    Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale.

(a)    Changes in Capitalization. Subject to any required action by the stockholders of the Company, the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under Option, as well as the price per share and the number of shares of Common Stock covered by each Option under the Plan which has not yet been exercised shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an Option.

 

8


(b)    Dissolution or Liquidation. In the event of the proposed dissolution or liquidation of the Company, the Offering Periods then in progress shall be shortened by setting a new Exercise Date (the “New Exercise Date”), and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Administrator. The New Exercise Date shall be before the date of the Company’s proposed dissolution or liquidation. The Administrator shall notify each Participant in writing, at least ten business days prior to the New Exercise Date, that the Exercise Date for the Participant’s Option has been changed to the New Exercise Date and that the Participant’s Option shall be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 6.1 hereof or the Participant has ceased to be an Eligible Employee as provided in Section 6.2 hereof.

(c)    Merger or Asset Sale. In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, each outstanding Option shall be assumed or an equivalent Option substituted by the successor corporation or a Parent or Subsidiary of the successor corporation. In the event that the successor corporation refuses to assume or substitute for the Option, any Offering Periods then in progress shall be shortened by setting a New Exercise Date and any Offering Periods then in progress shall end on the New Exercise Date. The New Exercise Date shall be before the date of the Company’s proposed sale or merger. The Administrator shall notify each Participant in writing, at least ten business days prior to the New Exercise Date, that the Exercise Date for the Participant’s Option has been changed to the New Exercise Date and that the Participant’s Option shall be exercised automatically on the New Exercise Date, unless prior to such date the Participant has withdrawn from the Offering Period as provided in Section 6.1 hereof or the Participant has ceased to be an Eligible Employee as provided in Section 6.2 hereof.

5.3    Insufficient Shares. If the Administrator determines that, on a given Exercise Date, the number of shares of Common Stock with respect to which Options are to be exercised may exceed the number of shares of Common Stock remaining available for sale under the Plan on such Exercise Date, the Administrator shall make a pro rata allocation of the shares of Common Stock available for issuance on such Exercise Date in as uniform a manner as shall be practicable and as it shall determine in its sole discretion to be equitable among all Participants exercising Options to purchase Common Stock on such Exercise Date, and unless additional shares are authorized for issuance under the Plan, no further Offering Periods shall take place and the Plan shall terminate pursuant to Section 7.5 hereof. If an Offering Period is so terminated, then the balance of the amount credited to the Participant’s Plan Account which has not been applied to the purchase of shares of Common Stock shall be paid to such Participant in one lump sum in cash within 30 days after such Exercise Date, without any interest thereon.

5.4    Rights as Stockholders. With respect to shares of Common Stock subject to an Option, a Participant shall not be deemed to be a stockholder of the Company and shall not have any of the rights or privileges of a stockholder. A Participant shall have the rights and privileges of a stockholder of the Company when, but not until, shares of Common Stock have been deposited in the designated brokerage account following exercise of his or her Option.

 

9


ARTICLE VI.

TERMINATION OF PARTICIPATION

6.1    Cessation of Contributions; Voluntary Withdrawal.

(a)    A Participant may cease payroll deductions during an Offering Period and elect to withdraw from the Plan by delivering written notice of such election to the Company in such form and at such time prior to the Exercise Date for such Offering Period as may be established by the Administrator (a “Withdrawal Election”). A Participant electing to withdraw from the Plan may elect to either (i) withdraw all of the funds then credited to the Participant’s Plan Account as of the date on which the Withdrawal Election is received by the Company, in which case amounts credited to such Plan Account shall be returned to the Participant in one lump-sum payment in cash within 30 days after such election is received by the Company, without any interest thereon, and the Participant shall cease to participate in the Plan and the Participant’s Option for such Offering Period shall terminate; or (ii) exercise the Option for the maximum number of whole shares of Common Stock on the applicable Exercise Date with any remaining Plan Account balance returned to the Participant in one lump-sum payment in cash within 30 days after such Exercise Date, without any interest thereon, and after such exercise cease to participate in the Plan. Upon receipt of a Withdrawal Election, the Participant’s payroll deduction authorization and his or her Option shall terminate.

(b)    A Participant’s withdrawal from the Plan shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods which commence after the termination of the Offering Period from which the Participant withdraws.

(c)    A Participant who ceases contributions to the Plan during any Offering Period shall not be permitted to resume contributions to the Plan during that Offering Period.

6.2    Termination of Eligibility. Upon a Participant’s ceasing to be an Eligible Employee, for any reason, such Participant’s Option for the applicable Offering Period shall automatically terminate, the Participant shall be deemed to have elected to withdraw from the Plan, and such Participant’s Plan Account shall be paid to such Participant or, in the case of the Participant’s death, to the person or persons entitled thereto pursuant to applicable law, within 30 days after such cessation of being an Eligible Employee, without any interest thereon. If a Participant transfers employment from the Company or any Designated Subsidiary participating in the Section 423 Component to any Designated Subsidiary participating in the Non-Section 423 Component, such transfer shall not be treated as a termination of employment, but the Participant shall immediately cease to participate in the Section 423 Component; however, any contributions made for the Offering Period in which such transfer occurs shall be transferred to the Non-Section 423 Component, and such Participant shall immediately join the then-current Offering under the Non-Section 423 Component upon the same terms and conditions in effect for the Participant’s participation in the Section 423 Component, except for such modifications otherwise applicable for Participants in such Offering. A Participant who transfers employment from any Designated Subsidiary participating in the Non-Section 423 Component to the Company or any Designated Subsidiary participating in the Section 423 Component shall not be treated as terminating the Participant’s employment and shall remain a Participant in the Non-Section 423 Component until the earlier of (i) the end of the current Offering Period under the Non-Section 423 Component, or (ii) the Enrollment Date of the first Offering Period in which the Participant is eligible to participate following such transfer. Notwithstanding the foregoing, the Administrator may establish different rules to govern transfers of employment between companies participating in the Section 423 Component and the Non-Section 423 Component, consistent with the applicable requirements of Section 423 of the Code.

 

10


ARTICLE VII.

GENERAL PROVISIONS

7.1    Administration.

(a)    The Plan shall be administered by the Committee, which shall be composed of members of the Board. The Committee may delegate administrative tasks under the Plan to the services of an Agent or Employees to assist in the administration of the Plan, including establishing and maintaining an individual securities account under the Plan for each Participant.

(b)    It shall be the duty of the Administrator to conduct the general administration of the Plan in accordance with the provisions of the Plan. The Administrator shall have the power, subject to, and within the limitations of, the express provisions of the Plan:

(i)    To establish and terminate Offerings;

(ii)    To determine when and how Options shall be granted and the provisions and terms of each Offering (which need not be identical);

(iii)    To select Designated Subsidiaries in accordance with Section 7.2 hereof; and

(iv)    To construe and interpret the Plan, the terms of any Offering and the terms of the Options and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret, amend or revoke any such rules. The Administrator, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, any Offering or any Option, in a manner and to the extent it shall deem necessary or expedient to administer the Plan, subject to Section 423 of the Code for the Section 423 Component.

(c)    The Administrator may adopt rules or procedures relating to the operation and administration of the Plan to accommodate the specific requirements of local laws and procedures. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding handling of participation elections, payroll deductions, payment of interest, conversion of local currency, payroll tax, withholding procedures and handling of stock certificates which vary with local requirements. In its absolute discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Administrator under the Plan.

(d)    The Administrator may adopt sub-plans applicable to particular Designated Subsidiaries or locations, which sub-plans may be designed to be outside the scope of Section 423 of the Code. The rules of such sub-plans may take precedence over other provisions of this Plan, with the exception of Section 5.1 hereof, but unless otherwise superseded by the terms of such sub-plan, the provisions of this Plan shall govern the operation of such sub-plan.

(e)    All expenses and liabilities incurred by the Administrator in connection with the administration of the Plan shall be borne by the Company. The Administrator may, with the approval of the Committee, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Administrator, the Company and its officers and directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Administrator in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Board or Administrator shall be

 

11


personally liable for any action, determination or interpretation made in good faith with respect to the Plan or the options, and all members of the Board or Administrator shall be fully protected by the Company in respect to any such action, determination, or interpretation.

7.2    Designation of Subsidiary Corporations. The Board or Administrator shall designate from time to time among the Subsidiaries the Subsidiaries that shall constitute Designated Subsidiaries, and determine whether such Designated Subsidiaries shall participate in the Section 423 Component or Non-Section 423 Component. The Board or Administrator may designate a Subsidiary, or terminate the designation of a Subsidiary, without the approval of the stockholders of the Company.

7.3    Reports. Individual accounts shall be maintained for each Participant in the Plan. Statements of Plan Accounts shall be given to Participants at least annually, which statements shall set forth the amounts of payroll deductions, the Option Price, the number of shares purchased and the remaining cash balance, if any.

7.4    No Right to Employment. Nothing in the Plan shall be construed to give any person (including any Participant) the right to remain in the employ of the Company, a Parent or a Subsidiary or to affect the right of the Company, any Parent or any Subsidiary to terminate the employment of any person (including any Participant) at any time, with or without cause, which right is expressly reserved.

7.5    Amendment and Termination of the Plan.

(a)    The Board may, in its sole discretion, amend, suspend or terminate the Plan at any time and from time to time; provided, however, that without approval of the Company’s stockholders given within 12 months before or after action by the Board, the Plan may not be amended to increase the maximum number of shares of Common Stock subject to the Plan or change the designation or class of Eligible Employees.

(b)    In the event the Administrator determines that the ongoing operation of the Plan may result in unfavorable financial accounting consequences, the Administrator may, to the extent permitted under Section 423 of the Code for the Section 423 Component, in its discretion and, to the extent necessary or desirable, modify or amend the Plan to reduce or eliminate such accounting consequence including, but not limited to:

(i)    altering the Option Price for any Offering Period including an Offering Period underway at the time of the change in Option Price;

(ii)    shortening any Offering Period so that the Offering Period ends on a new Exercise Date, including an Offering Period underway at the time of the Administrator action; and

(iii)    allocating shares of Common Stock.

Such modifications or amendments shall not require stockholder approval or the consent of any Participant.

(c)    Upon termination of the Plan, the balance in each Participant’s Plan Account shall be refunded as soon as practicable after such termination, without any interest thereon.

 

12


7.6    Use of Funds; No Interest Paid. All funds received by the Company by reason of purchase of shares of Common Stock under the Plan shall be included in the general funds of the Company free of any trust or other restriction and may be used for any corporate purpose, except for funds contributed under Offerings in which the local law of a non-U.S. jurisdiction requires that contributions to the Plan by Participants be segregated from the Company’s general corporate funds and/or deposited with an independent third party for Participants in non-U.S. jurisdictions. No interest shall be paid to any Participant or credited under the Plan, except as may be required by local law in a non-U.S. jurisdiction. If the segregation of funds and/or payment of interest on any Participant’s account is so required, such provisions shall apply to all Participants in the relevant Offering except to the extent otherwise permitted by U.S. Treasury Regulation Section 1.423-2(f). With respect to any Offering under the Non-Section 423 Component, the payment of interest shall apply as determined by the Administrator (but absent any such determination, no interest shall apply).

7.7    Term; Approval by Stockholders. No Option may be granted during any period of suspension of the Plan or after termination of the Plan. The Plan shall be submitted for the approval of the Company’s stockholders within 12 months after the date of the Board’s initial adoption of the Plan. Options may be granted prior to such stockholder approval; provided, however, that such Options shall not be exercisable prior to the time when the Plan is approved by the stockholders; provided, further that if such approval has not been obtained by the end of the 12-month period, all Options previously granted under the Plan shall thereupon terminate and be canceled and become null and void without being exercised.

7.8    Effect Upon Other Plans. The adoption of the Plan shall not affect any other compensation or incentive plans in effect for the Company, any Parent or any Subsidiary. Nothing in the Plan shall be construed to limit the right of the Company, any Parent or any Subsidiary (a) to establish any other forms of incentives or compensation for Employees of the Company or any Parent or any Subsidiary, or (b) to grant or assume Options otherwise than under the Plan in connection with any proper corporate purpose, including, but not by way of limitation, the grant or assumption of options in connection with the acquisition, by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, firm or association.

7.9    Conformity to Securities Laws. Notwithstanding any other provision of the Plan, the Plan and the participation in the Plan by any individual who is then subject to Section 16 of the Exchange Act shall be subject to any additional limitations set forth in any applicable exemption rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

7.10    Notice of Disposition of Shares. Each Participant in the Section 423 Component shall give the Company prompt notice of any disposition or other transfer of any shares of Common Stock, acquired pursuant to the exercise of an Option granted under the Section 423 Component, if such disposition or transfer is made (a) within two years after the applicable Grant Date or (b) within one year after the transfer of such shares of Common Stock to such Participant upon exercise of such Option. The Company may direct that any certificates evidencing shares acquired pursuant to the Plan refer to such requirement.

7.11    Tax Withholding. The Company or any Parent or any Subsidiary shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to any purchase of shares of Common Stock under the Plan or any sale of such shares.

 

13


7.12    Governing Law. The Plan and all rights and obligations thereunder shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of law rules thereof or of any other jurisdiction.

7.13    Notices. All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

7.14    Conditions To Issuance of Shares.

(a)    Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any certificates or make any book entries evidencing shares of Common Stock pursuant to the exercise of an Option by a Participant, unless and until the Board or the Committee has determined, with advice of counsel, that the issuance of such shares of Common Stock is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements of any securities exchange or automated quotation system on which the shares of Common Stock are listed or traded, and the shares of Common Stock are covered by an effective registration statement or applicable exemption from registration. In addition to the terms and conditions provided herein, the Board or the Committee may require that a Participant make such reasonable covenants, agreements, and representations as the Board or the Committee, in its discretion, deems advisable in order to comply with any such laws, regulations, or requirements.

(b)    All certificates for shares of Common Stock delivered pursuant to the Plan and all shares of Common Stock issued pursuant to book entry procedures are subject to any stop-transfer orders and other restrictions as the Committee deems necessary or advisable to comply with federal, state, or foreign securities or other laws, rules and regulations and the rules of any securities exchange or automated quotation system on which the shares of Common Stock are listed, quoted, or traded. The Committee may place legends on any certificate or book entry evidencing shares of Common Stock to reference restrictions applicable to the shares of Common Stock.

(c)    The Committee shall have the right to require any Participant to comply with any timing or other restrictions with respect to the settlement, distribution or exercise of any Option, including a window-period limitation, as may be imposed in the sole discretion of the Committee.

(d)    Notwithstanding any other provision of the Plan, unless otherwise determined by the Committee or required by any applicable law, rule or regulation, the Company may, in lieu of delivering to any Participant certificates evidencing shares of Common Stock issued in connection with any Option, record the issuance of shares of Common Stock in the books of the Company (or, as applicable, its transfer agent or stock plan administrator).

7.15    Equal Rights and Privileges. All Eligible Employees of the Company (or of any Designated Subsidiary) granted Options pursuant to an Offering under the Section 423 Component shall have equal rights and privileges under this Plan to the extent required under Section 423 of the Code so that the Section 423 Component qualifies as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Any provision of the Section 423 Component that is inconsistent with Section 423 of the Code shall, without further act or amendment by the Company or the Board, be reformed to comply with the equal rights and privileges requirement of Section 423 of the Code. Eligible Employees participating in the Non-Section 423 Component need not have the same rights and privileges as Eligible Employees participating in the Section 423 Component.

 

14


7.16    Rules Particular to Specific Countries. Notwithstanding anything herein to the contrary, the terms and conditions of the Plan with respect to Participants who are tax residents of a particular non-U.S. country or who are foreign nationals or employed in non-U.S. jurisdictions may be subject to an addendum to the Plan in the form of an appendix or sub-plan (which appendix or sub-plan may be designed to govern Offerings under the Section 423 Component or the Non-Section 423 Component, as determined by the Administrator). To the extent that the terms and conditions set forth in an appendix or sub-plan conflict with any provisions of the Plan, the provisions of the appendix or sub-plan shall govern. The adoption of any such appendix or sub-plan shall be pursuant to Section 7.1 above. Without limiting the foregoing, the Administrator is specifically authorized to adopt rules and procedures, with respect to Participants who are foreign nationals or employed in non-U.S. jurisdictions, regarding the exclusion of particular Subsidiaries from participation in the Plan, eligibility to participate, the definition of Compensation, handling of payroll deductions or other contributions by Participants, payment of interest, conversion of local currency, data privacy security, payroll tax, withholding procedures, establishment of bank or trust accounts to hold payroll deductions or contributions. Without limiting the generality of the foregoing, the Administrator is specifically authorized to adopt rules and procedures regarding the exclusion of particular Subsidiaries from participation in the Plan, eligibility to participate, the definition of Compensation, handling of payroll deductions or other contributions by Participants, payment of interest, conversion of local currency, data privacy security, payroll tax, withholding procedures, establishment of bank or trust accounts to hold payroll deductions or contributions, determination of beneficiary designation requirements, and handling of stock certificates. The Administrator also is authorized to determine that, to the extent permitted by U.S. Treasury Regulation Section 1.423-2(f), the terms of a purchase right granted under the Plan or an Offering to citizens or residents of a non-U.S. jurisdiction will be less favorable than the terms of purchase rights granted under the Plan or the same Offering to Employees resident solely in the U.S. To the extent any sub-plan or appendix or other changes approved by the Administrator are inconsistent with the requirements of Section 423 of the Code or would jeopardize the tax-qualified status of the Section 423 Component, the change shall cause the Designated Subsidiaries affected thereby to be considered Designated Subsidiaries in a separate Offering under the Non-Section 423 Component instead of the Section 423 Component. To the extent any Employee of a Designated Subsidiary in the Section 423 Component is a citizen or resident of a foreign jurisdiction (without regard to whether they are also a U.S. citizen or a resident alien (within the meaning of Section 7701(b)(1)(A) of the Code)) and compliance with the laws of the foreign jurisdiction would cause the Section 423 Component, any Offering or the option to violate the requirements of Section 423 of the Code, such Employee shall be considered a Participant in a separate Offering under the Non-Section 423 Component.

Notwithstanding any other provisions of the Plan to the contrary, in non-U.S. jurisdictions where participation in the Plan through payroll deductions is prohibited, the Administrator may provide that an Eligible Employee may elect to participate through contributions to his or her account under the Plan in a form acceptable to the Administrator in lieu of or in addition to payroll deductions; provided, however, that, for any Offering under the Section 423 Component, the Administrator must determine that any alternative method of contribution is applied on an equal and uniform basis to all Eligible Employees in the Offering.

7.17    Transfer of Employment. A transfer of employment from one Designated Subsidiary to another shall not be treated as a termination of employment. If a Participant transfers employment from the Company or any Designated Subsidiary participating in the Section 423 Component to a Designated Subsidiary participating in the Non-Section 423 Component, he or she shall immediately cease to participate in the Section 423 Component; however, any payroll deductions made for the Offering Period in which such transfer occurs shall be transferred to the Non-Section 423 Component, and such Participant shall immediately join the then current Offering under the Non-Section 423 Component upon the same terms and conditions in effect for his or her participation in the Section

 

15


423 Component, except for such modifications otherwise applicable for Participants in such Offering. A Participant who transfers employment from a Designated Subsidiary participating in the Non-Section 423 Component to the Company or any Designated Subsidiary participating in the Section 423 Component shall remain a Participant in the Non-Section 423 Component until the earlier of (i) the end of the current Offering Period under the Non-Section 423 Component, or (ii) the Enrollment Date of the first Offering Period in which he or she is eligible to participate following such transfer. Notwithstanding the foregoing, the Administrator may establish different rules to govern transfers of employment between companies participating in the Section 423 Component and the Non-Section 423 Component, consistent with the applicable requirements of Section 423 of the Code.

7.18    Section 409A. The Section 423 Component of the Plan and the Options granted pursuant to Offerings thereunder are intended to be exempt from the application of Section 409A. Neither the Non-Section 423 Component nor any Option granted pursuant to an Offering thereunder is intended to constitute or provide for “nonqualified deferred compensation” within the meaning of Section 409A. Notwithstanding any provision of the Plan to the contrary, if the Administrator determines that any Option granted under the Plan may be or become subject to Section 409A or that any provision of the Plan may cause an Option granted under the Plan to be or become subject to Section 409A, the Administrator may adopt such amendments to the Plan and/or adopt other policies and procedures (including amendments, policies and procedures with retroactive effect), or take any other actions as the Administrator determines are necessary or appropriate to avoid the imposition of taxes under Section 409A, either through compliance with the requirements of Section 409A or with an available exemption therefrom.

*    *    *    *    *

I hereby certify that the foregoing Plan was adopted by the Board of Directors of Berkeley Lights, Inc. on                     , 2020.

I hereby certify that the foregoing Plan was approved by the stockholders of Berkeley Lights, Inc. on                     , 2020.

Executed on                     , 2020.

 

 

Corporate Secretary

 

16

Exhibit 10.4

BERKELEY LIGHTS, INC.

NON-EMPLOYEE DIRECTOR COMPENSATION PROGRAM

This Berkeley Lights, Inc. (the “Company”) Non-Employee Director Compensation Program (this “Program”) has been adopted under the Company’s 2020 Incentive Award Plan (the “Plan”) and shall be effective upon the closing of the Company’s initial public offering of its common stock (the “IPO”). Capitalized terms not otherwise defined herein shall have the meaning ascribed in the Plan.

Cash Compensation

Effective upon the IPO, annual retainers will be paid in the following amounts to Non-Employee Directors:

 

Non-Employee Director:

   $ 40,000  

Non-Executive Chair:

   $ 40,000  

Audit Committee Chair:

   $ 20,000  

Compensation Committee Chair:

   $ 12,000  

Nominating and Corporate Governance Committee Chair:

   $ 10,000  

Audit Committee Member (non-Chair):

   $ 10,000  

Compensation Committee Member (non-Chair):

   $ 6,000  

Nominating and Corporate Governance Committee Member (non-Chair):

   $ 5,000  

All annual retainers will be paid in cash quarterly in arrears promptly following the end of the applicable calendar quarter, but in no event more than 30 days after the end of such quarter. In the event a Non-Employee Director does not serve as a Non-Employee Director, or in the applicable positions described above, for an entire calendar quarter, the retainer paid to such Non-Employee Director shall be prorated for the portion of such calendar quarter actually served as a Non-Employee Director, or in such position, as applicable.

Equity Compensation

 

Initial Stock Option Grant:   

Each Non-Employee Director who is initially elected or appointed to serve on the Board after the IPO shall be granted an Option under the Plan or any other applicable Company equity incentive plan then-maintained by the Company to purchase 80,000 shares of Common Stock.

 

The Initial Option will be automatically granted on the date on which such Non-Employee Director commences service on the Board, and will vest as to 1/36th of the shares subject thereto on each monthly anniversary of the applicable date of grant such


 

   that the shares subject to the Initial Option are fully vested on the third anniversary of the grant, subject to the Non-Employee Director continuing in service on the Board through each vesting date.
Annual Stock Option Grant:   

Each Non-Employee Director who has, for at least six months, been serving on the Board as of the date of each annual shareholder meeting of the Company (each, an “Annual Meeting”) shall be granted an Option under the Plan or any other applicable Company equity incentive plan then-maintained by the Company to purchase 40,000 shares of Common Stock.

 

The Annual Option will be automatically granted on the date of the applicable Annual Meeting, and will vest in full on the earlier of (i) the first anniversary of the date of grant and (ii) immediately prior to the Annual Meeting following the date of grant, subject to the Non-Employee Director continuing in service on the Board through such vesting date.

The per share exercise price of each Option granted to a Non-Employee Director shall equal the Fair Market Value of a share of common stock on the date the Option is granted.

The term of each Option granted to a Non-Employee Director shall be ten years from the date the Option is granted.

No portion of an Initial Option or Annual Option which is unvested or unexercisable at the time of a Non-Employee Director’s termination of service on the Board shall become vested and exercisable thereafter.

Members of the Board who are employees of the Company or any parent or subsidiary of the Company who subsequently terminate their service with the Company and any parent or subsidiary of the Company and remain on the Board will not receive an Initial Option, but to the extent that they are otherwise eligible, will be eligible to receive, after termination from service with the Company and any parent or subsidiary of the Company, Annual Options as described above.

Change in Control

Upon a Change in Control of the Company, all outstanding equity awards granted under the Plan and any other equity incentive plan maintained by the Company that are held by a Non-Employee Director shall become fully vested and/or exercisable, irrespective of any other provisions of the Non-Employee Director’s Award Agreement.

 

2


Reimbursements

The Company shall reimburse each Non-Employee Director for all reasonable, documented, out-of-pocket travel and other business expenses incurred by such Non-Employee Director in the performance of his or her duties to the Company in accordance with the Company’s applicable expense reimbursement policies and procedures as in effect from time to time.

Miscellaneous

The other provisions of the Plan shall apply to the Options granted automatically pursuant to this Program, except to the extent such other provisions are inconsistent with this Program. All applicable terms of the Plan apply to this Program as if fully set forth herein, and all grants of Options hereby are subject in all respects to the terms of the Plan. The grant of any Option under this Program shall be made solely by and subject to the terms set forth in a written agreement in a form to be approved by the Board and duly executed by an executive officer of the Company.

Effectiveness

This Program shall become effective upon the consummation of the IPO.

* * * * *

 

3


I hereby certify that the foregoing Program was adopted by the Board of Directors of Berkeley Lights, Inc. on [                    ], 2020.

* * * * *

I hereby certify that the foregoing Program was approved by the stockholders of Berkeley Lights, Inc. on [                    ], 2020.

Executed on [                    ], 2020.

 

 

 

Corporate Secretary

Exhibit 10.5

INDEMNIFICATION AND ADVANCEMENT AGREEMENT

This Indemnification and Advancement Agreement (“Agreement”) is made as of                     , 2020 by and between Berkeley Lights, Inc., a Delaware corporation (the “Company”), and                     , [a member of the Board of Directors / an officer] of the Company (“Indemnitee”). This Agreement supersedes and replaces any and all previous Agreements between the Company and Indemnitee covering indemnification and advancement.

RECITALS

WHEREAS, the Board of Directors of the Company (the “Board”) believes that highly competent persons have become more reluctant to serve publicly-held corporations as directors, officers, or in other capacities unless they are provided with adequate protection through insurance or adequate indemnification and advancement of expenses against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the corporation;

WHEREAS, the Board has determined that, in order to attract and retain qualified individuals, the Company will attempt to maintain on an ongoing basis, at its sole expense, liability insurance to protect persons serving the Company and its subsidiaries from certain liabilities. Although the furnishing of such insurance has been a customary and widespread practice among United States-based corporations and other business enterprises, the Company believes that, given current market conditions and trends, such insurance may be available to it in the future only at higher premiums and with more exclusions. At the same time, directors, officers, and other persons in service to corporations or business enterprises are being increasingly subjected to expensive and time-consuming litigation relating to, among other things, matters that traditionally would have been brought only against the Company or business enterprise itself. The Bylaws and Certificate of Incorporation of the Company require indemnification of the officers and directors of the Company. Indemnitee may also be entitled to indemnification pursuant to the General Corporation Law of the State of Delaware (the “DGCL”). The Bylaws, Certificate of Incorporation, and the DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification and advancement of expenses;

WHEREAS, the uncertainties relating to such insurance, to indemnification, and to advancement of expenses may increase the difficulty of attracting and retaining such persons;

WHEREAS, the Board has determined that the increased difficulty in attracting and retaining such persons is detrimental to the best interests of the Company and its stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future;

WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified;


WHEREAS, this Agreement is a supplement to and in furtherance of the Bylaws, Certificate of Incorporation and any resolutions adopted pursuant thereto, and is not a substitute therefor, nor diminishes or abrogates any rights of Indemnitee thereunder; and

WHEREAS, Indemnitee does not regard the protection available under the Bylaws, Certificate of Incorporation, DGCL and insurance as adequate in the present circumstances, and may not be willing to serve or continue to serve as an officer or director without adequate additional protection, and the Company desires Indemnitee to serve or continue to serve in such capacity. Indemnitee is willing to serve, continue to serve and to take on additional service for or on behalf of the Company on the condition that Indemnitee be so indemnified and be advanced expenses.

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

Section 1.     Services to the Company. Indemnitee agrees to serve as a [director/officer] of the Company. Indemnitee may at any time and for any reason resign from such position (subject to any other contractual obligation or any obligation imposed by operation of law). This Agreement does not create any obligation on the Company to continue Indemnitee in such position and is not an employment contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.

Section 2.    Definitions. As used in this Agreement:

(a)    “Agent” means any person who is authorized by the Company or an Enterprise to act for or represent the interests of the Company or an Enterprise, respectively.

(b)    A “Change in Control” occurs upon the earliest to occur after the date of this Agreement of any of the following events:

i.    Acquisition of Stock by Third Party. Any Person (as defined below) is or becomes the Beneficial Owner (as defined below), directly or indirectly, of securities of the Company representing fifteen percent (15%) or more of the combined voting power of the Company’s then outstanding securities unless the change in relative beneficial ownership of the Company’s securities by any Person results solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors;

ii.    Change in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(b)(i), 2(b)(iii) or 2(b)(iv)) whose election by the Board or nomination for election by the Company’s stockholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority of the members of the Board;

 

2


iii.    Corporate Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 51% of the combined voting power of the voting securities of the surviving entity outstanding immediately after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing body of such surviving entity;

iv.    Liquidation. The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; and

v.    Other Events. There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act (as defined below), whether or not the Company is then subject to such reporting requirement.

vi.    For purposes of this Section 2(b), the following terms have the following meanings:

 

  1

“Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.

 

  2

“Person” has the meaning as set forth in Sections 13(d) and 14(d) of the Exchange Act; provided, however, that Person excludes (i) the Company, (ii) any trustee or other fiduciary holding securities under an employee benefit plan of the Company, and (iii) any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company.

 

  3

“Beneficial Owner” has the meaning given to such term in Rule 13d-3 under the Exchange Act; provided, however, that Beneficial Owner excludes any Person otherwise becoming a Beneficial Owner by reason of the stockholders of the Company approving a merger of the Company with another entity.

(c)    “Corporate Status” describes the status of a person who is or was acting as a director, officer, employee, fiduciary, or Agent of the Company or an Enterprise.

(d)    “Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification is sought by Indemnitee.

 

3


(e)    “Enterprise” means any other corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity for which Indemnitee is or was serving at the request of the Company as a director, officer, employee, or Agent.

(f)    “Expenses” includes all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts and other professionals, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, any federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under this Agreement, ERISA excise taxes and penalties, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, or otherwise participating in, a Proceeding. Expenses also include (i) Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premium, security for, and other costs relating to any cost bond, supersedeas bond, or other appeal bond or its equivalent, and (ii) for purposes of Section 14(d) only, Expenses incurred by Indemnitee in connection with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement, by litigation or otherwise. The parties agree that for the purposes of any advancement of Expenses for which Indemnitee has made written demand to the Company in accordance with this Agreement, all Expenses included in such demand that are certified by affidavit of Indemnitee’s counsel as being reasonable in the good faith judgment of such counsel will be presumed conclusively to be reasonable. Expenses, however, do not include amounts paid in settlement by Indemnitee or the amount of judgments or fines against Indemnitee.

(g)    “Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning the Indemnitee under this Agreement, or of other indemnitees under similar indemnification agreements), or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” does not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement.

(h)    “Potential Change in Control” means the occurrence of any of the following events: (i) the Company enters into any written or oral agreement, undertaking or arrangement, the consummation of which would result in the occurrence of a Change in Control; (ii) any Person or the Company publicly announces an intention to take or consider taking actions which if consummated would constitute a Change in Control; (iii) any Person who becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 5% or more of the combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of directors increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such Person on the date hereof; or (iv) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(i)    The term “Proceeding” includes any threatened, pending or completed action, suit, claim, counterclaim, cross claim, arbitration, mediation, alternate dispute resolution

 

4


mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, legislative, or investigative (formal or informal) nature, including any appeal therefrom, in which Indemnitee was, is or will be involved as a party, potential party, non-party witness or otherwise by reason of Indemnitee’s Corporate Status or by reason of any action taken by Indemnitee (or a failure to take action by Indemnitee) or of any action (or failure to act) on Indemnitee’s part while acting pursuant to Indemnitee’s Corporate Status, in each case whether or not serving in such capacity at the time any liability or Expense is incurred for which indemnification, reimbursement, or advancement of Expenses can be provided under this Agreement. A Proceeding also includes a situation the Indemnitee believes in good faith may lead to or culminate in the institution of a Proceeding.

Section 3.    Indemnity in Third-Party Proceedings. The Company will indemnify Indemnitee in accordance with the provisions of this Section 3 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 3, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses, judgments, fines and amounts paid in settlement (including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses, judgments, fines and amounts paid in settlement) actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal Proceeding had no reasonable cause to believe that Indemnitee’s conduct was unlawful.

Section 4.    Indemnity in Proceedings by or in the Right of the Company. The Company will indemnify Indemnitee in accordance with the provisions of this Section 4 if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 4, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. The Company will not indemnify Indemnitee for Expenses under this Section 4 related to any claim, issue or matter in a Proceeding for which Indemnitee has been finally adjudged by a court to be liable to the Company, unless, and only to the extent that, the Delaware Court of Chancery or any court in which the Proceeding was brought determines upon application by Indemnitee that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnification.

Section 5.    Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement, to the fullest extent permitted by applicable law, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee in connection with any Proceeding the extent that Indemnitee is successful, on the merits or otherwise. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all

 

5


claims, issues or matters in such Proceeding, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with or related to each successfully resolved claim, issue or matter to the fullest extent permitted by law. For purposes of this Section 5 and without limitation, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, will be deemed to be a successful result as to such claim, issue or matter.

Section 6.    Indemnification For Expenses of a Witness. Notwithstanding any other provision of this Agreement and to the fullest extent permitted by applicable law, the Company will indemnify Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on Indemnitee’s behalf in connection with any Proceeding to which Indemnitee is not a party but to which Indemnitee is a witness, deponent, interviewee, or otherwise asked to participate.

Section 7.    Partial Indemnification. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of Expenses, but not, however, for the total amount thereof, the Company will indemnify Indemnitee for the portion thereof to which Indemnitee is entitled.

Section 8.    Additional Indemnification. Notwithstanding any limitation in Sections 3, 4, or 5, the Company will indemnify Indemnitee to the fullest extent permitted by applicable law (including but not limited to, the DGCL and any amendments to or replacements of the DGCL adopted after the date of this Agreement that expand the Company’s ability to indemnify its officers and directors) if Indemnitee is a party to or threatened to be made a party to any Proceeding (including a Proceeding by or in the right of the Company to procure a judgment in its favor).

Section 9.    Exclusions. Notwithstanding any provision in this Agreement, the Company is not obligated under this Agreement to make any indemnification payment to Indemnitee in connection with any Proceeding:

(a)    for which payment has actually been made to or on behalf of Indemnitee under any insurance policy or other indemnity provision, except to the extent provided in Section 16(b) of the Exchange Act (as defined in Section 2(b) hereof) and except with respect to any excess beyond the amount paid under any insurance policy or other indemnity provision; or

(b)    for (i) an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the Company within the meaning of Section 16(b) of the Exchange Act or similar provisions of state statutory law or common law, (ii) any reimbursement of the Company by the Indemnitee of any bonus or other incentive-based or equity-based compensation or of any profits realized by the Indemnitee from the sale of securities of the Company, as required in each case under the Exchange Act (including any such reimbursements that arise from an accounting restatement of the Company pursuant to Section 304 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”), or the payment to the Company of profits arising from the purchase and sale by Indemnitee of securities in violation of Section 306 of the Sarbanes-Oxley Act) or (iii) any reimbursement of the Company by Indemnitee of any compensation pursuant to any compensation recoupment or clawback policy adopted by the Board or the compensation committee of the Board, including but not limited to any such policy adopted to comply with stock exchange listing requirements implementing Section 10D of the Exchange Act; or

 

6


(c)    initiated by Indemnitee, including any Proceeding (or any part of any Proceeding) initiated by Indemnitee against the Company or its directors, officers, employees or other indemnitees, unless (i) the Proceeding or part of any Proceeding is to enforce Indemnitee’s rights to indemnification or advancement, of Expenses, including a Proceeding (or any part of any Proceeding) initiated pursuant to Section 14 of this Agreement, (ii) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation or (iii) the Company provides the indemnification, in its sole discretion, pursuant to the powers vested in the Company under applicable law.

Section 10.    Advances of Expenses.

(a)    The Company will advance, to the extent not prohibited by law, the Expenses incurred by Indemnitee in connection with any Proceeding (or any part of any Proceeding) not initiated by Indemnitee or any Proceeding (or any part of any Proceeding) initiated by Indemnitee if (i) the Proceeding or part of any Proceeding is to enforce Indemnitee’s rights to obtain indemnification or advancement of Expenses from the Company or Enterprise, including a proceeding initiated pursuant to Section 14 or (ii) the Board authorized the Proceeding (or any part of any Proceeding) prior to its initiation. The Company will advance the Expenses within thirty (30) days after the receipt by the Company of a statement or statements requesting such advances from time to time, whether prior to or after final disposition of any Proceeding.

(b)    Advances will be unsecured and interest free. Indemnitee undertakes to repay the amounts advanced (without interest) to the extent that it is ultimately determined that Indemnitee is not entitled to be indemnified by the Company, thus Indemnitee qualifies for advances upon the execution of this Agreement and delivery to the Company. No other form of undertaking is required other than the execution of this Agreement. The Company will make advances without regard to Indemnitee’s ability to repay the Expenses and without regard to Indemnitee’s ultimate entitlement to indemnification under the other provisions of this Agreement.

Section 11.    Procedure for Notification of Claim for Indemnification or Advancement.

(a)    Indemnitee will notify the Company in writing of any Proceeding with respect to which Indemnitee intends to seek indemnification or advancement of Expenses hereunder as soon as reasonably practicable following the receipt by Indemnitee of written notice thereof. Indemnitee will include in the written notification to the Company a description of the nature of the Proceeding and the facts underlying the Proceeding and provide such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification following the final disposition of such Proceeding. Indemnitee’s failure to notify the Company will not relieve the Company from any obligation it may have to Indemnitee under this Agreement, and any delay in so notifying the Company will not constitute a waiver by Indemnitee of any rights under this Agreement. The Secretary of the Company will, promptly upon receipt of such a request for indemnification or advancement, advise the Board in writing that Indemnitee has requested indemnification or advancement.

 

7


(b)    The Company will be entitled to participate in the Proceeding at its own expense.

Section 12.    Procedure Upon Application for Indemnification.

(a)    Unless a Change of Control has occurred, the determination of Indemnitee’s entitlement to indemnification will be made:

i.    by a majority vote of the Disinterested Directors, even though less than a quorum of the Board;

ii.    by a committee of Disinterested Directors designated by a majority vote of the Disinterested Directors, even though less than a quorum of the Board;

iii.     if there are no such Disinterested Directors or, if such Disinterested Directors so direct, by written opinion provided by Independent Counsel selected by the Board; or

iv.    if so directed by the Board, by the stockholders of the Company.

(b)    If a Change in Control has occurred, the determination of Indemnitee’s entitlement to indemnification will be made by written opinion provided by Independent Counsel selected by Indemnitee (unless Indemnitee requests such selection be made by the Board).

(c)     The party selecting Independent Counsel pursuant to subsection (a)(iii) or (b) of this Section 12 will provide written notice of the selection to the other party. The notified party may, within ten (10) days after receiving written notice of the selection of Independent Counsel, deliver to the selecting party a written objection to such selection; provided, however, that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection will set forth with particularity the factual basis of such assertion. Absent a proper and timely objection, the person so selected will act as Independent Counsel. If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within thirty (30) days after the later of submission by Indemnitee of a written request for indemnification pursuant to Section 11(a) hereof and the final disposition of the Proceeding, Independent Counsel has not been selected or, if selected, any objection to has not been resolved, either the Company or Indemnitee may petition the Delaware Court for the appointment as Independent Counsel of a person selected by such court or by such other person as such court designates. Upon the due commencement of any judicial proceeding or arbitration pursuant to Section 14(a) of this Agreement, Independent Counsel will be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of professional conduct then prevailing).

 

8


(d)    Indemnitee will cooperate with the person, persons or entity making the determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company will advance and pay any Expenses incurred by Indemnitee in so cooperating with the person, persons or entity making the indemnification determination irrespective of the determination as to Indemnitee’s entitlement to indemnification and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom. The Company promptly will advise Indemnitee in writing of the determination that Indemnitee is or is not entitled to indemnification, including a description of any reason or basis for which indemnification has been denied and providing a copy of any written opinion provided to the Board by Independent Counsel.

(e)    If it is determined that Indemnitee is entitled to indemnification, the Company will make payment to Indemnitee within ten (10) days after such determination.

Section 13.    Presumptions and Effect of Certain Proceedings.

(a)    In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination will, to the fullest extent not prohibited by law, presume Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 11(a) of this Agreement, and the Company will, to the fullest extent not prohibited by law, have the burden of proof to overcome that presumption. Neither the failure of the Company (including by its directors or Independent Counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or Independent Counsel) that Indemnitee has not met such applicable standard of conduct, will be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

(b)    If the determination of the Indemnitee’s entitlement to indemnification has not made pursuant to Section 12 within sixty (60) days after the latter of (i) receipt by the Company of Indemnitee’s request for indemnification pursuant to Section 11(a) and (ii) the final disposition of the Proceeding for which Indemnitee requested Indemnification (the “Determination Period”), the requisite determination of entitlement to indemnification will, to the fullest extent not prohibited by law, be deemed to have been made and Indemnitee will be entitled to such indemnification, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law. The Determination Period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the person, persons or entity making the determination with respect to entitlement to indemnification in good faith requires such additional time for the obtaining or evaluating of documentation and/or information relating thereto; and provided, further, the Determination Period may be extended an additional fifteen (15) days if the determination of entitlement to indemnification is to be made by the stockholders pursuant to Section 12(a)(iv) of this Agreement.

 

9


(c)    The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, will not (except as otherwise expressly provided in this Agreement) of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

(d)    For purposes of any determination of good faith, Indemnitee will be deemed to have acted in good faith if Indemnitee acted based on the records or books of account of the Company, its subsidiaries, or an Enterprise, including financial statements, or on information supplied to Indemnitee by the directors or officers of the Company, its subsidiaries, or an Enterprise in the course of their duties, or on the advice of legal counsel for the Company, its subsidiaries, or an Enterprise or on information or records given or reports made to the Company or an Enterprise by an independent certified public accountant or by an appraiser, financial advisor or other expert selected with reasonable care by or on behalf of the Company, its subsidiaries, or an Enterprise. Further, Indemnitee will be deemed to have acted in a manner “not opposed to the best interests of the Company,” as referred to in this Agreement if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan. The provisions of this Section 13(d) is not exclusive and does not limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

(e)    The knowledge and/or actions, or failure to act, of any director, officer, trustee, partner, managing member, fiduciary, agent or employee of the Enterprise may not be imputed to Indemnitee for purposes of determining Indemnitee’s right to indemnification under this Agreement.

Section 14.    Remedies of Indemnitee.

(a)    Indemnitee may commence litigation against the Company in the Delaware Court of Chancery to obtain indemnification or advancement of Expenses provided by this Agreement in the event that (i) a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) the Company does not advance Expenses pursuant to Section 10 of this Agreement, (iii) the determination of entitlement to indemnification is not made pursuant to Section 12 of this Agreement within the Determination Period, (iv) the Company does not indemnify Indemnitee pursuant to Section 5 or 6 or the second to last sentence of Section 12(d) of this Agreement within ten (10) days after receipt by the Company of a written request therefor, (v) the Company does not indemnify Indemnitee pursuant to Section 3, 4, 7, or 8 of this Agreement within ten (10) days after a determination has been made that Indemnitee is entitled to indemnification, or (vi) in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or Proceeding designed to deny, or to recover from, the

 

10


Indemnitee the benefits provided or intended to be provided to the Indemnitee hereunder. Alternatively, Indemnitee, at Indemnitee’s option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Indemnitee must commence such Proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such Proceeding pursuant to this Section 14(a); provided, however, that the foregoing clause does not apply in respect of a Proceeding brought by Indemnitee to enforce Indemnitee’s rights under Section 5 of this Agreement. The Company will not oppose Indemnitee’s right to seek any such adjudication or award in arbitration.

(b)    If a determination is made pursuant to Section 12 of this Agreement that Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 14 will be conducted in all respects as a de novo trial, or arbitration, on the merits and Indemnitee may not be prejudiced by reason of that adverse determination. In any judicial proceeding or arbitration commenced pursuant to this Section 14 the Company will have the burden of proving Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be and will not introduce evidence of the determination made pursuant to Section 12 of this Agreement.

(c)    If a determination is made pursuant to Section 12 of this Agreement that Indemnitee is entitled to indemnification, the Company will be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 14, absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

(d)    The Company is, to the fullest extent not prohibited by law, precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 14 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and will stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this Agreement.

(e)    It is the intent of the Company that, to the fullest extent permitted by law, the Indemnitee not be required to incur legal fees or other Expenses associated with the interpretation, enforcement or defense of Indemnitee’s rights under this Agreement by litigation or otherwise because the cost and expense thereof would substantially detract from the benefits intended to be extended to the Indemnitee hereunder. The Company, to the fullest extent permitted by law, will (within ten (10) days after receipt by the Company of a written request therefor) advance to Indemnitee such Expenses which are incurred by Indemnitee in connection with any action concerning this Agreement, Indemnitee’s right to indemnification or advancement of Expenses from the Company, or concerning any directors’ and officers’ liability insurance policies maintained by the Company, and will indemnify Indemnitee against any and all such Expenses unless the court determines that each of the Indemnitee’s claims in such Proceeding were made in bad faith or were frivolous or are prohibited by law.

 

11


Section 15.    Establishment of Trust.

(a)    In the event of a Potential Change in Control or a Change in Control, the Company will, upon written request by Indemnitee, create a trust for the benefit of Indemnitee (the “Trust”) and from time to time upon written request of Indemnitee will fund such Trust in an amount sufficient to satisfy the reasonably anticipated indemnification and advancement obligations of the Company to the Indemnitee in connection with any Proceeding for which Indemnitee has demanded indemnification and/or advancement prior to the Potential Change in Control or Change in Control (the “Funding Obligation”). The trustee of the Trust (the “Trustee”) will be a bank or trust company or other individual or entity chosen by the Indemnitee and reasonably acceptable to the Company. Nothing in this Section 15 relieves the Company of any of its obligations under this Agreement.

(b)    The amount or amounts to be deposited in the Trust pursuant to the Funding Obligation will be determined by mutual agreement of the Indemnitee and the Company or, if the Company and the Indemnitee are unable to reach such an agreement, by Independent Counsel selected in accordance with Section 12(b) of this Agreement. The terms of the Trust will provide that, except upon the consent of both the Indemnitee and the Company, upon a Change in Control: (i) the Trust may not be revoked, or the principal thereof invaded, without the written consent of the Indemnitee; (ii) the Trustee will advance Expenses incurred by Indemnitee, to the fullest extent permitted by applicable law, within two (2) business days of a request by the Indemnitee; (iii) the Company will continue to fund the Trust in accordance with the Funding Obligation; (iv) the Trustee will promptly pay to the Indemnitee all amounts for which the Indemnitee is entitled to indemnification pursuant to this Agreement or otherwise; and (v) all unexpended funds in such Trust revert to the Company upon mutual agreement by the Indemnitee and the Company or, if the Indemnitee and the Company are unable to reach such an agreement, by Independent Counsel selected in accordance with Section 12(b) of this Agreement, that the Indemnitee has been fully indemnified under the terms of this Agreement. New York law (without regard to its conflicts of laws rules) governs the Trust and the Trustee will consent to the exclusive jurisdiction of Delaware Court of Chancery, in accordance with Section 25 of this Agreement.

Section 16.    Non-exclusivity; Survival of Rights; Insurance; Subrogation.

(a)    The indemnification and advancement of Expenses provided by this Agreement are not exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, the Bylaws, any agreement, a vote of stockholders or a resolution of directors, or otherwise. The indemnification and advancement of Expenses provided by this Agreement may not be limited or restricted by any amendment, alteration or repeal of this Agreement in any way with respect to any action taken or omitted by Indemnitee in Indemnitee’s Corporate Status occurring prior to any amendment, alteration or repeal of this Agreement. To the extent that a change in Delaware law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Bylaws, Certificate of Incorporation, or this Agreement, it is the intent of the parties hereto that Indemnitee enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every other right and remedy is cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, will not prevent the concurrent assertion or employment of any other right or remedy.

 

12


(b)    The Company hereby acknowledges that Indemnitee may have certain rights to indemnification, advancement of Expenses and/or insurance provided by one or more Persons with whom or which Indemnitee may be associated [(including, without limitation, [Entity] and certain of its affiliates, collectively, the “Entity Indemnitors”)]).

i.    The Company hereby acknowledges and agrees:

1)    the Company is the indemnitor of first resort with respect to any request for indemnification or advancement of Expenses made pursuant to this Agreement concerning any Proceeding arising from or related to Indemnitee’s Corporate Status with the Company;

2)     the Company is primarily liable for all indemnification and indemnification or advancement of Expenses obligations for any Proceeding arising from or related to Indemnitee’s Corporate Status, whether created by law, organizational or constituent documents, contract (including this Agreement) or otherwise;

3)    any obligation of any other Persons with whom or which Indemnitee may be associated [(including, without limitation, any Entity Indemnitor)] to indemnify Indemnitee and/or advance Expenses to Indemnitee in respect of any proceeding are secondary to the obligations of the Company’s obligations;

4)    the Company will indemnify Indemnitee and advance Expenses to Indemnitee hereunder to the fullest extent provided herein without regard to any rights Indemnitee may have against any other Person with whom or which Indemnitee may be associated [(including any Entity Indemnitor)] or insurer of any such Person; and

ii.    the Company irrevocably waives, relinquishes and releases [(A)] any other Person with whom or which Indemnitee may be associated [(including, without limitation, any Entity Indemnitor)] from any claim of contribution, subrogation, reimbursement, exoneration or indemnification, or any other recovery of any kind in respect of amounts paid by the Company to Indemnitee pursuant to this Agreement [and (B) any right to participate in any claim or remedy of Indemnitee against any Entity Indemnitor (or former Entity Indemnitor)], whether or not such claim, remedy or right arises in equity or under contract, statute or common law[, including, without limitation, the right to take or receive from any Entity Indemnitor (or former Entity Indemnitor), directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right].

iii.    In the event any other Person with whom or which Indemnitee may be associated [(including, without limitation, any Entity Indemnitor)] or their insurers advances or extinguishes any liability or loss for Indemnitee, the payor has a right of subrogation against the Company or its insurers for all amounts so paid which would otherwise be payable by the Company or its insurers under this Agreement. In no event will payment by any other Person with whom or which Indemnitee may be associated [(including, without limitation, any Entity Indemnitor)] or

 

13


their insurers affect the obligations of the Company hereunder or shift primary liability for the Company’s obligation to indemnify or advance of Expenses to any other Person with whom or which Indemnitee may be associated [(including, without limitation, any Entity Indemnitor)].

iv.    Any indemnification or advancement of Expenses provided by any other Person with whom or which Indemnitee may be associated [(including, without limitation, any Entity Indemnitor)] is specifically in excess over the Company’s obligation to indemnify and advance Expenses or any valid and collectible insurance (including but not limited to any malpractice insurance or professional errors and omissions insurance) provided by the Company.

(c)    To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers, employees, or agents of the Enterprise, the Company will obtain a policy or policies covering Indemnitee to the maximum extent of the coverage available for any such director, officer, employee or agent under such policy or policies, including coverage in the event the Company does not or cannot, for any reason, indemnify or advance Expenses to Indemnitee as required by this Agreement. If, at the time of the receipt of a notice of a claim pursuant to this Agreement, the Company has director and officer liability insurance in effect, the Company will give prompt notice of such claim or of the commencement of a Proceeding, as the case may be, to the insurers in accordance with the procedures set forth in the respective policies. The Company will thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such Proceeding in accordance with the terms of such policies. Indemnitee agrees to assist the Company efforts to cause the insurers to pay such amounts and will comply with the terms of such policies, including selection of approved panel counsel, if required.

(d)    The Company’s obligation to indemnify or advance Expenses hereunder to Indemnitee for any Proceeding concerning Indemnitee’s Corporate Status with an Enterprise will be reduced by any amount Indemnitee has actually received as indemnification or advancement of Expenses from such Enterprise. The Company and Indemnitee intend that any such Enterprise (and its insurers) be the indemnitor of first resort with respect to indemnification and advancement of Expenses for any Proceeding related to or arising from Indemnitee’s Corporate Status with such Enterprise. The Company’s obligation to indemnify and advance Expenses to Indemnitee is secondary to the obligations the Enterprise or its insurers owe to Indemnitee. Indemnitee agrees to take all reasonably necessary and desirable action to obtain from an Enterprise indemnification and advancement of Expenses for any Proceeding related to or arising from Indemnitee’s Corporate Status with such Enterprise.

(e)    In the event of any payment made by the Company under this Agreement, the Company will be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee from any Enterprise or insurance carrier. Indemnitee will execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

Section 17.    Duration of Agreement. This Agreement continues until and terminates upon the later of: (a) ten (10) years after the date that Indemnitee ceases to serve as a [director / officer] of the Company or (b) one (1) year after the final termination of any Proceeding then

 

14


pending in respect of which Indemnitee is granted rights of indemnification or advancement of Expenses hereunder and of any Proceeding commenced by Indemnitee pursuant to Section 14 of this Agreement relating thereto. The indemnification and advancement of Expenses rights provided by or granted pursuant to this Agreement are binding upon and be enforceable by the parties hereto and their respective successors and assigns (including any direct or indirect successor by purchase, merger, consolidation or otherwise to all or substantially all of the business or assets of the Company), continue as to an Indemnitee who has ceased to be a director, officer, employee or agent of the Company or of any other Enterprise, and inure to the benefit of Indemnitee and Indemnitee’s spouse, assigns, heirs, devisees, executors and administrators and other legal representatives.

Section 18.    Severability. If any provision or provisions of this Agreement is held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the validity, legality and enforceability of the remaining provisions of this Agreement (including without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) will not in any way be affected or impaired thereby and remain enforceable to the fullest extent permitted by law; (b) such provision or provisions will be deemed reformed to the extent necessary to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) will be construed so as to give effect to the intent manifested thereby.

Section 19.    Interpretation. Any ambiguity in the terms of this Agreement will be resolved in favor of Indemnitee and in a manner to provide the maximum indemnification and advancement of Expenses permitted by law. The Company and Indemnitee intend that this Agreement provide to the fullest extent permitted by law for indemnification and advancement in excess of that expressly provided, without limitation, by the Certificate of Incorporation, the Bylaws, vote of the Company stockholders or disinterested directors, or applicable law.

Section 20.    Enforcement.

(a)    The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby in order to induce Indemnitee to serve as a director or officer of the Company, and the Company acknowledges that Indemnitee is relying upon this Agreement in serving or continuing to serve as a director or officer of the Company.

(b)    This Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Certificate of Incorporation, the Bylaws and applicable law, and is not a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.

 

15


Section 21.    Modification and Waiver. No supplement, modification or amendment of this Agreement is binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement will be deemed or constitutes a waiver of any other provisions of this Agreement nor will any waiver constitute a continuing waiver.

Section 22.    Notice by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena, complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder. The failure of Indemnitee to so notify the Company does not relieve the Company of any obligation which it may have to the Indemnitee under this Agreement or otherwise.

Section 23.    Notices. All notices, requests, demands and other communications under this Agreement will be in writing and will be deemed to have been duly given if (a) delivered by hand to the other party, (b) sent by reputable overnight courier to the other party or (c) sent by facsimile transmission or electronic mail, with receipt of oral confirmation that such communication has been received:

(a)    If to Indemnitee, at the address indicated on the signature page of this Agreement, or such other address as Indemnitee provides to the Company.

(b)    If to the Company to:

 

Name:    Berkeley Lights, Inc.
Address:    5858 Horton Street, Suite 320
   Emeryville, California 94608
Attention:   
Email:   

or to any other address as may have been furnished to Indemnitee by the Company.

Section 24.    Contribution. To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, will contribute to the amount incurred by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses, in connection with any claim relating to an indemnifiable event under this Agreement, in such proportion as is deemed fair and reasonable in light of all of the circumstances of such Proceeding in order to reflect (i) the relative benefits received by the Company and Indemnitee as a result of the event(s) and/or transaction(s) giving cause to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents) and Indemnitee in connection with such event(s) and/or transaction(s).

Section 25.    Applicable Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties are governed by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect to any arbitration commenced by Indemnitee pursuant to Section 14(a) of this Agreement, the

 

16


Company and Indemnitee hereby irrevocably and unconditionally (i) agree that any action or Proceeding arising out of or in connection with this Agreement may be brought only in the Delaware Court of Chancery and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any action or Proceeding arising out of or in connection with this Agreement, (iii) waive any objection to the laying of venue of any such action or Proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any such action or Proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum.

Section 26.    Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which will for all purposes be deemed to be an original but all of which together constitutes one and the same Agreement. Only one such counterpart signed by the party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.

Section 27.    Headings. The headings of this Agreement are inserted for convenience only and do not constitute part of this Agreement or affect the construction thereof.

IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the day and year first above written.

 

BERKELEY LIGHTS, INC.

  

INDEMNITEE

By:                                         

                                                                

Name:

  

Name:

Office:

  

Address:                                     

  

                                     

  

                                     

 

17

Exhibit 10.6

BERKELEY LIGHTS, INC.

CHANGE IN CONTROL AND SEVERANCE AGREEMENT

This Change in Control and Severance Agreement (the “Agreement”) is made and entered into by and between [                    ] (“Executive”) and Berkeley Lights, Inc. (the “Company”), effective as of [the latest date set forth by the signatures of the parties hereto below]/[the date Executive commences employment with the Company] (the “Effective Date”).

Background

A.    The Board of Directors of the Company (the “Board”) recognizes that the possibility of an acquisition of the Company or an involuntary termination can be a distraction to Executive and can cause Executive to consider alternative employment opportunities. The Board has determined that it is in the best interests of the Company and its stockholders to assure that the Company will have the continued dedication and objectivity of Executive, notwithstanding the possibility, threat or occurrence of such an event.

B.    The Board believes that it is in the best interests of the Company and its stockholders to provide Executive with an incentive to continue Executive’s employment and to motivate Executive to maximize the value of the Company upon a Change in Control (as defined below) for the benefit of its stockholders.

C.    The Board believes that it is imperative to provide Executive with severance benefits upon certain terminations of Executive’s service to the Company that enhance Executive’s financial security and provide incentive and encouragement to Executive to remain with the Company notwithstanding the possibility of such an event.

D.    Unless otherwise defined herein, capitalized terms used in this Agreement are defined in Section 9 below.

Agreement

The parties hereto agree as follows:

1.    Term of Agreement. This Agreement shall become effective as of the Effective Date and terminate upon the date that all obligations of the parties hereto with respect to this Agreement have been satisfied.

2.    At-Will Employment. The Company and Executive acknowledge that Executive’s employment is and shall continue to be “at-will,” as defined under applicable law. Except as provided in Section 5 below, if Executive’s employment terminates for any reason, Executive shall not be entitled to any severance payments, benefits or compensation other than as provided in this Agreement.


3.    Covered Termination Outside a Change in Control Period. If Executive experiences a Covered Termination outside a Change in Control Period, then, subject to (i) Executive delivering to the Company an executed general release of all claims against the Company and its affiliates in a form approved by the Company (a “Release of Claims”) that becomes effective and irrevocable in accordance with Section 14(a)(v) below, or such shorter period of time specified by the Company, following such Covered Termination and (ii) Executive’s continued compliance with Section 12 below, then in addition to any accrued but unpaid salary, benefits, vacation and expense reimbursements through the Termination Date payable in accordance with applicable law, the Company shall provide Executive with the following:

(a)    Severance. During the period of time commencing on the Termination Date and ending on the [        ] ([    ])1 month anniversary of the Termination Date, the Company shall continue to pay Executive his/her base salary at the rate in effect immediately prior to the Termination Date. Such payments shall be made in accordance with the Company’s standard payroll practices, less applicable withholdings, beginning on the first payroll date following the date the Release of Claims becomes effective and irrevocable in accordance with Section 14(a)(v) below, and with the first installment including any amounts that would have been paid had the Release of Claims been effective and irrevocable on the Termination Date.

(b)    Continued Healthcare. If Executive timely elects to receive continued healthcare coverage pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall directly pay, or reimburse Executive for, the Company’s portion of the premium (at the same rates in effect on the Termination Date) for Executive and Executive’s covered dependents through the earlier of (i) the [        ] ([    ])2 month anniversary of the Termination Date and (ii) the date Executive and Executive’s covered dependents, if any, become eligible for healthcare coverage under another employer’s plan(s). Notwithstanding the foregoing, (i) if any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Internal Revenue Code of 1986, as amended, (the “Code”) under Treasury Regulation Section 1.409A-1(a)(5), or (ii) the Company is otherwise unable to continue to cover Executive under its group health plans without penalty under applicable law (including without limitation, Section 2716 of the Public Health Service Act), then, in either case, an amount equal to each remaining Company subsidy shall thereafter be paid to Executive in substantially equal monthly installments. After the Company ceases to pay premiums pursuant to this Section 3(b), Executive may, if eligible, elect to continue healthcare coverage at Executive’s expense in accordance with the provisions of COBRA. Executive shall notify the Company immediately if Executive becomes covered by a group health plan of a subsequent employer.

 

 

1 

NTD: To equal 12 months for the CEO, 9 months for the C-Suites and other Section 16s and 6 months for Executive Managers.

2 

NTD: To equal 12 months for the CEO, 9 months for the C-Suites and other Seciton 16s and 6 months for Executive Managers.

 

-2-


4.    Covered Termination During a Change in Control Period. If Executive experiences a Covered Termination during a Change in Control Period, then, subject to (i) Executive delivering to the Company an executed Release of Claims that becomes effective and irrevocable in accordance with Section 14(a)(v) below, or such shorter period of time specified by the Company, following such Covered Termination and (ii) Executive’s continued compliance with Section 12 below, then in addition to any accrued but unpaid salary, benefits, vacation and expense reimbursements through the Termination Date payable in accordance with applicable law, the Company shall provide Executive with the following:

(a)    Severance. During the period of time commencing on the Termination Date and ending on the [        ] ([    ])3 month anniversary of the Termination Date, the Company shall continue to pay Executive his/her base salary at the rate in effect immediately prior to the Termination Date. Such payments shall be made in accordance with the Company’s standard payroll practices, less applicable withholdings, beginning on the first payroll date following the date the Release of Claims becomes effective and irrevocable in accordance with Section 14(a)(v) below, and with the first installment including any amounts that would have been paid had the Release of Claims been effective and irrevocable on the Termination Date.

(b)    Target Bonus. Executive shall be entitled to receive an amount equal to [        ] ([    ])4 months of Executive’s target annual bonus assuming achievement of performance goals at one hundred percent (100%) of target at the rate in effect immediately prior to the Termination Date, payable in a cash lump sum, less applicable withholdings, on the first payroll date following the date the Release of Claims becomes effective and irrevocable becomes effective and irrevocable in accordance with Section 14(a)(v) below.

(c)    Continued Healthcare. If Executive timely elects to receive continued healthcare coverage pursuant to the provisions of COBRA, the Company shall directly pay, or reimburse Executive for, the Company’s portion of the premium (at the same rates in effect on the Termination Date) for Executive and Executive’s covered dependents through the earlier of (i) the [        ] ([    ])5 month anniversary of the Termination Date and (ii) the date Executive and Executive’s covered dependents, if any, become eligible for healthcare coverage under another employer’s plan(s). Notwithstanding the foregoing, (i) if any plan pursuant to which such benefits are provided is not, or ceases prior to the expiration of the period of continuation coverage to be, exempt from the application of Section 409A of the Code under Treasury Regulation Section 1.409A-1(a)(5), or (ii) the Company is otherwise unable to continue to cover Executive under its group health plans without penalty under applicable law (including without limitation, Section 2716 of the Public Health Service Act), then, in either case, an amount equal to each remaining Company

 

 

 

 

3 

NTD: To equal 18 months for the CEO, 12 months for the C-Suites and other Section 16s and 9 months for Executive Managers.

4 

NTD: To equal 18 months for the CEO, 12 months for the C-Suites and other Section 16s and 9 months for Executive Managers.

5 

NTD: To equal 18 months for the CEO, 12 months for the C-Suites and other Section 16s and 9 months for Executive Managers.

 

-3-


subsidy shall thereafter be paid to Executive in substantially equal monthly installments. After the Company ceases to pay premiums pursuant to this Section 4(c), Executive may, if eligible, elect to continue healthcare coverage at Executive’s expense in accordance with the provisions of COBRA. Executive shall notify the Company immediately if Executive becomes covered by a group health plan of a subsequent employer.

(d)    Equity Awards. Each outstanding and unvested equity award (excluding any such awards that vest in whole or in part based on the attainment of performance-vesting conditions), including, without limitation, each restricted stock, stock option, restricted stock unit and stock appreciation right, held by Executive shall automatically become vested and, if applicable, exercisable and any forfeiture restrictions or rights of repurchase thereon shall immediately lapse with respect to one percent (100%) of the shares subject thereto (excluding any such awards that vest in whole or in part based on the attainment of performance-vesting conditions, which shall be governed by the terms of the applicable award agreement), as of immediately prior to the Termination Date. To give effect to the foregoing, upon the Termination Date, (i) the vested portion of such equity awards shall be remain outstanding and/or be exercisable for the period(s) of time set forth in the applicable equity award agreements, (ii) Executive’s outstanding equity awards shall cease vesting, and (iii) the unvested shares subject to Executive’s outstanding equity awards shall remain outstanding (but unvested) until the earlier to occur of (A) the original expiration date of the equity award and (B) forty five (45) day anniversary of the Date of Termination (the “Equity Award Period”). In the event a Change in Control has not been consummated by end of the Equity Award Period, then the unvested portion of Executive’s equity awards shall terminate immediately without further action as of such date.

5.    Certain Reductions. Notwithstanding anything herein to the contrary, the Company shall reduce Executive’s severance benefits under this Agreement, in whole or in part, by any other severance benefits, pay in lieu of notice, or other similar benefits payable to Executive by the Company in connection with Executive’s termination, including but not limited to payments or benefits pursuant to (a) any applicable legal requirement, including, without limitation, the Worker Adjustment and Retraining Notification Act, or (b) any other Company agreement, arrangement, policy or practice relating to Executive’s termination of employment with the Company. The benefits provided under this Agreement are intended to satisfy, to the greatest extent possible, any and all statutory obligations that may arise out of Executive’s termination of employment. Such reductions shall be applied on a retroactive basis, with severance benefits paid first in time being recharacterized as payments pursuant to the Company’s statutory obligation.

6.    Deemed Resignation. Upon termination of Executive’s service for any reason, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company or any of its affiliates, and, at the Company’s request, Executive shall execute such documents as are necessary or desirable to effectuate such resignations.

7.    Other Terminations. If Executive’s employment with the Company terminates for any reason other than due to a Covered Termination, then Executive shall not be entitled to any benefits hereunder other than accrued but unpaid salary, vacation and expense reimbursements through the Termination Date in accordance with applicable law and to elect any continued healthcare coverage as may be required under COBRA or similar state law.

 

-4-


8.    Limitation on Payments. Notwithstanding anything in this Agreement to the contrary, if any payment or distribution Executive would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Code and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then such Payment shall either be (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such Payment being subject to the Excise Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the largest payment, notwithstanding that all or some portion the Payment may be taxable under Section 4999 of the Code. The Company will select an adviser with experience in performing calculations regarding the applicability of Section 280G of the Code and the Excise Tax, provided, that the adviser’s determination shall be made based upon “substantial authority” within the meaning of Section 6662 of the Code to perform the foregoing calculations. The Company shall bear all expenses with respect to the determinations by such adviser required to be made hereunder. The adviser shall provide its calculations to the Company and Executive within fifteen (15) calendar days after the date on which Executive’s right to a Payment is triggered (if requested at that time by the Company or Executive) or such other time as requested by the Company. Any good faith determinations of the adviser made hereunder shall be final, binding and conclusive upon the Company and Executive. Any reduction in payments or benefits pursuant to this Section 8 will occur in the following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits payable to Executive.

9.    Definitions. The following terms used in this Agreement shall have the following meanings:

(a)    “Cause” means the occurrence of any of the following: (i) Executive’s commission of any felony or other crime, in each case involving moral turpitude; (ii) Executive’s commission of any other act or omission involving fraud or intentional deceit with respect to the Company or any of its affiliates or any of their directors, stockholders, partners or members; (iii) any act or omission by Executive involving dishonesty that causes material injury to the Company or any of its affiliates or any of their directors, stockholders, partners or members; (iv) willful misconduct by Executive with respect to the Company or any of its subsidiaries; (v) any breach of a fiduciary duty owed by Executive to the Company or its stockholders or Executive’s contractual breach of this Agreement or any other agreement referred to herein (including the Confidential Informaiton Agreement), provided that if such breach is reasonably curable, failure to cure such breach within ten (10) business days following the delivery written notice from the Company describing such breach; or (vi) Executive’s continued failure to perform assigned duties after receiving written notification of the failure from the Company and a period of at least ten (10) business days following the delivery written notice to cure such failure. The determination that a termination of Executive’s employment is either for Cause or without Cause shall be made by the Board or its Compensation Committee, in each case, in its sole discretion.

(b)    “Change in Control” has the meaning ascribed to such term under the Company’s 2019 Equity Incentive Plan, as amended; provided, that such transaction must also constitute a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5).

 

-5-


(c)    “Change in Control Period” means the period of time commencing forty five (45) days prior to the closing of a Change in Control and ending on the twelve (12) month anniversary of the closing such Change in Control.

(d)    “Covered Termination” means the termination of Executive’s employment by the Company other than for Cause or by Executive for Good Reason, in each case that, to the extent necessary, constitutes a Separation from Service.

(e)    “Good Reason” shall mean that Executive has complied in all material respects with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events, without Executive’s prior written consent: (i) a material reduction of Executive’s annual base salary (unless pursuant to a salary reduction program applicable generally to the Company’s senior management employees); (ii) solely during a Change in Control Period, a material reduction in Executive’s role or responsibilities in the successor entity or the parent entity as compared to Executive’s role or responsibilities in the Company prior to the Change in Control; provided that a mere change of title and/or reporting authority alone shall not constitute such a material reduction; or (iii) relocation of Executive’s principal place of employment to a place greater than 50 miles from Executive’s then-current principal place of employment.

(f)    “Good Reason Process” shall mean that (i) Executive has reasonably determined in good faith that a “Good Reason” condition has occurred; (ii) Executive has notified the Company in writing of the first occurrence of the Good Reason condition within sixty (60) days of the first time the Executive becomes aware of the occurrence of such condition; (iii) Executive has cooperated in good faith with the Company’s efforts, for a period not less than thirty (30) days immediately following the Company’s receipt of such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) Executive terminates Executive’s employment with the Company within thirty (30) days after the end of the Cure Period. If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(g)    “Separation from Service” means a “separation from service” with the Company within the meaning of Section 409A of the Code and the Department of Treasury regulations and other guidance promulgated thereunder.

(h)    “Termination Date” means the date on which Executive experiences a Covered Termination.

10.     Successors.

(a)    Company’s Successors. Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner

 

-6-


and to the same extent as the Company would be required to perform such obligations in the absence of a succession. For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business or assets which executes and delivers the assumption agreement described in this Section 10(a) or which becomes bound by the terms of this Agreement by operation of law.

(b)    Executive’s Successors. The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

11.    Notices. Any notices provided hereunder must be in writing and shall be deemed effective upon the earlier of personal delivery (including personal delivery by facsimile), delivery by email or the third day after mailing by first class mail, to the Company at its primary office location and to Executive at Executive’s address as listed in the Company’s books and records.

12.    Confidentiality; Non-Disparagement.

(a)    Confidentiality. Executive hereby expressly confirms Executive’s continuing obligations to the Company pursuant to that certain confidentiality agreement by and between the Company and Executive (the “Confidential Information Agreement”).

(b)    Non-Disparagement. Executive agrees that Executive shall not disparage, criticize or defame the Company, its affiliates and their respective affiliates, directors, officers, agents, partners, stockholders or employees, either publicly or privately. Nothing in this Section 12(b) shall apply to any evidence or testimony required by any court, arbitrator or government agency.

(c)    Whistleblower Protections and Trade Secrets. Notwithstanding anything to the contrary contained herein, nothing in this Agreement or the Confidentiality Agreement prohibits Executive from reporting possible violations of federal law or regulation to any United States governmental agency or entity in accordance with the provisions of and rules promulgated under Section 21F of the Securities Exchange Act of 1934 or Section 806 of the Sarbanes-Oxley Act of 2002, or any other whistleblower protection provisions of state or federal law or regulation (including the right to receive an award for information provided to any such government agencies). Furthermore, in accordance with 18 U.S.C. § 1833, notwithstanding anything to the contrary in this Agreement: (i) Executive shall not be in breach of this Agreement, and shall not be held criminally or civilly liable under any federal or state trade secret law (A) for the disclosure of a trade secret that is made in confidence to a federal, state, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (B) for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal; and (ii) if Executive files a lawsuit for retaliation by the Company for reporting a suspected violation of law, Executive may disclose the trade secret to Executive’s attorney, and may use the trade secret information in the court proceeding, if Executive files any document containing the trade secret under seal, and does not disclose the trade secret, except pursuant to court order.

 

-7-


13.    Dispute Resolution. Unless otherwise prohibited by law or specified below, all disputes, claims and causes of action, in law or equity, arising from or relating to this Agreement or to Executive’s employment or the termination thereof (each, a “Claim”) shall be resolved solely and exclusively by final and binding arbitration held in Alameda County, California through JAMS under its Employment Arbitration Rules and Procedures, which are available at www.jamsadr.com/rules-employment-arbitration. The arbitration provisions of this Agreement shall be governed by and enforceable pursuant to the Federal Arbitration Act. In all other respects for provisions not governed by the Federal Arbitration Act, this Agreement shall be construed in accordance with the laws of the State of California, without reference to conflicts of law principles. The arbitrator shall: (a) provide adequate discovery for the resolution of the dispute; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. Except to the extent of filing fees Executive would incur were the matter to be litigated in court, the Company shall be responsible for the JAMS administrative fees and the arbitrator’s fees and costs. The arbitrator shall award the prevailing party attorneys’ fees and expert fees, if any. The parties agree to abide by all decisions and awards rendered in such proceedings. Such decisions and awards rendered by the arbitrator shall be final and conclusive. All such controversies, claims or disputes shall be settled in this manner in lieu of any action at law or equity; provided, however, that nothing in this subsection shall be construed as precluding the bringing of an action for injunctive relief or specific performance as provided in this Agreement or the Confidential Information Agreement. This dispute resolution process and any arbitration hereunder shall be confidential and neither any party nor the neutral arbitrator shall disclose the existence, contents or results of such process without the prior written consent of all parties, except where necessary or compelled in a court to enforce this arbitration provision or an award from such arbitration or otherwise in a legal proceeding. Executive and the Company understand that by agreeing to arbitrate any claim pursuant to this Section 13, they will not have the right to have any claim decided by a jury or a court, but shall instead have any claim decided through arbitration. Executive and the Company waive any constitutional or other right to bring claims covered by this Agreement other than in their individual capacities. Except as may be prohibited by applicable law, the foregoing waiver includes the ability to assert claims as a plaintiff or class member in any purported class or representative proceeding. Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by court action instead of arbitration.

14.    Miscellaneous Provisions.

(a)    Section 409A.

(i)    Separation from Service. Notwithstanding any provision to the contrary in this Agreement, no amount constituting deferred compensation subject to Section 409A of the Code shall be payable pursuant to Sections 3 or 4 above unless Executive’s termination of employment constitutes a Separation from Service.

(ii)    Specified Employee. Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed at the time of his or her Separation from Service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is

 

-8-


required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (A) the expiration of the six-month period measured from the date of Executive’s Separation from Service or (B) the date of Executive’s death. Upon the first business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section 14(a)(ii) shall be paid in a lump sum to Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein.

(iii)    Expense Reimbursements. To the extent that any reimbursements payable pursuant to this Agreement are subject to the provisions of Section 409A of the Code, any such reimbursements payable to Executive pursuant to this Agreement shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.

(iv)    Installments. For purposes of Section 409A of the Code (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment.

(v)    Release. Notwithstanding anything to the contrary in this Agreement, to the extent that any payments due under this Agreement as a result of Executive’s termination of employment are subject to Executive’s execution and delivery of a Release of Claims, (A) the Company shall deliver the Release of Claims to Executive within ten business days following Executive’s Termination Date, and the Company’s failure to deliver a Release of Claims prior to the expiration of such ten business day period shall constitute a waiver of any requirement to execute a Release of Claims, (B) if Executive fails to execute the Release of Claims on or prior to the Release Expiration Date (as defined below) or timely revokes Executive’s acceptance of the Release of Claims thereafter, Executive shall not be entitled to any payments or benefits otherwise conditioned on the Release of Claims, and (C) in any case where Executive’s Termination Date and the Release Expiration Date fall in two separate taxable years, any payments required to be made to Executive that are conditioned on the Release of Claims and are treated as nonqualified deferred compensation for purposes of Section 409A of the Code shall be made in the later taxable year. For purposes hereof, “Release Expiration Date” shall mean (1) if Executive is under 40 years old as of the Termination Date, the date that is seven (7) days following the date upon which the Company timely delivers the Release of Claims to Executive, or such shorter time prescribed by the Company, and (2) if Executive is 40 years or older as of the Termination Date, the date that is twenty one (21) days following the date upon which the Company timely delivers the Release of Claims to Executive, or, if Executive’s termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967), the date that is forty five (45) days following such delivery date. To the extent that any payments of nonqualified deferred compensation (within the meaning of Section 409A) due under this Agreement as a result of Executive’s termination of employment are delayed pursuant to this Section 14(a)(v), such amounts shall be paid in a lump sum on the first

 

-9-


payroll date following the date that Executive executes and does not revoke the Release of Claims (and the applicable revocation period has expired) or, in the case of any payments subject to Section 14(a)(v)(C), on the first payroll date to occur in the subsequent taxable year, if later.

(b)    Withholding. The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local, or foreign withholding or other taxes or charges which the Company is required to withhold.

(c)    Waiver. No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized member of the Company (other than Executive). No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

(d)    Whole Agreement. This Agreement and the Confidential Information Agreement represent the entire understanding of the parties hereto with respect to the subject matter hereof and supersede all prior promises, arrangements and understandings regarding the same, whether written or unwritten, including, without limitation, any severance or change in control benefits in Executive’s offer letter agreement, employment agreement and/or equity award agreement or previously approved by the Company.

(e)    Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California without regard to its conflicts of law provisions.

(f)    Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid or unenforceable provisions had never been contained herein.

(g)    Counterparts. This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.

(h)    Executive Acknowledgement. Executive acknowledges that (i) Executive has consulted with or has had the opportunity to consult with independent counsel of Executive’s own choice concerning this Agreement, and has been advised to do so by the Company, and (ii) that Executive has read and understands the Agreement, is fully aware of its legal effect, and has entered into it freely based on Executive’s own judgment.

(Signature page follows)

 

-10-


The parties have executed this Agreement, in the case of the Company by its duly authorized officer, as of the dates set forth below.

 

BERKELEY LIGHTS, INC.
By:  

 

Title:  

 

Date:  

 

EXECUTIVE

 

[Name]  
Date:  

 

 

-11-

Exhibit 10.7

 

LOGO

April 4, 2013

Eric D. Hobbs, Ph.D

[#]

Dear Eric,

We are pleased to extend to you an offer of employment with Berkeley Lights, Inc. (the “Company”) as set forth below. This written agreement supersedes and replaces any prior agreements, representations or understandings, whether written, oral or implied, between you and the Company.

1. Title and Duties. You are being offered a full-time, exempt position as the Company’s Senior Director of Research and Development. You will be reporting to the Company’s Vice President of Systems Engineering, Steven Short. Your duties include, but are not limited to contribution to the Company’s strategic direction and strategic product plans of record. As a key member of the technical leadership team, you will participate in strategy discussions with partners and potential partners to define market-leading applications for the Company’s technologies. Your responsibilities will include active participation in and leadership of Company resources in investigating and implementing technology solutions resulting in successful commercial products and services. You will routinely participate in Company activities for the purpose of discussing, evaluating and implementing best business practices intended to further the goals of the Company. Your leadership role requires you to consistently evaluate, mentor and recruit talent capable of fulfilling job requirements as defined by you, which meet the Company’s business expectations. As a constructive and productive leader in the Company, you will be expected to lead by example by setting high standards of excellence and integrity in all your endeavors, including planning, management execution, and effective communications, in all your internal and external relationships with colleagues, partners, vendors and other third parties.

2. Commencement of Employment. The commencement date of your employment will be on or before May 21, 2013 provided that you sign, date and return this letter and the attached Employee Inventions Assignment and Confidentiality Agreement to the Company indicating your acceptance, no later than April 8, 2013. This offer of employment will expire if not accepted by that date.


3. Compensation As compensation for your services, you will be paid an annual salary of $200,000.00 paid at the rate of $16,666.66 per month in accordance with the Company’s standard payroll schedule. In addition, you will be eligible for the following:

a. Health Care Benefits. You will be eligible to participate in the Company’s benefit plans in effect, which will be updated from time to time, the most current implementation was January 1, 2013.

b. Equity Compensation. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 150,000 shares of the Company’s Common Stock. The exercise price per share will be equal to the fair market value per share on the date the option is granted. The option will be subject to the terms and conditions applicable to options granted under the Company’s 2011 Equity Incentive Plan (the “Plan”), as described in the Plan and the applicable Stock Option Agreement. You will vest in 25% of the option shares after 12 months of continuous service, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement. Eligibility for equity compensation and/or participation in any stock option plan shall not be construed as any assurance of continuing employment for any particular period of time.

All forms of compensation paid to you by the Company are subject to reduction to applicable withholding and payroll taxes and other deductions as required by law,

4. Employee Inventions Assignment and Confidentiality Agreement. As a condition of your employment, you are required to sign and return the attached Employee Inventions Assignment and Confidentiality Agreement (“EIAC Agreement”). Your execution of this letter shall be deemed to be your agreement to and acceptance of the attached EIAC Agreement even if for any reason you do not sign such EIAC Agreement. In addition, the existence and terms of this offer are confidential.

5. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this offer. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Chief Executive Officer of the Company.

6. Outside Employment and Competitive Activities. During the period of your full-time employment, you are required to devote your full-time, best efforts to the interests of the Company. In the event that you are initially employed as a part-time employee, or at some later date become employed as a part-time employee, during the period of your part-time employment, you are required to devote your best efforts to the interests of the Company. Regardless of whether you are a full-time or part-time employee, you agree that you will not, without the prior written consent of the Company, engage in, or encourage or assist others to engage in, any other employment or activity that: (i) would divert from the Company any business opportunity in which the Company can reasonably be expected to have an interest; (ii) would directly compete with, or involve preparation to compete with, the current or future

 

2


business of the Company; or (iii) would otherwise conflict with the Company’s interests or could cause a disruption of its operations or prospects. Violations of this paragraph include but are not limited to the direct or indirect, ownership, management, operation, control, employment by, or participation in the ownership, management, operation, or control of any business that is in any way involved with research, development, consulting and, or sale of commercial products within global life sciences markets. Excepted from this provision is ownership of not more than 10% of the outstanding shares of a publicly traded corporation.

7. Non-Interference. You understand that the Company has invested substantial time and effort in assembling its present staff and personnel. Accordingly, you agree that during your employment with the Company and for one year after the termination of such employment for any reason, you will not directly or indirectly either on your own behalf or in concert with others, solicit or induce, or attempt to solicit or induce, any person who is an employee, agent, independent contractor or otherwise of the Company, to leave his or her employment or affiliation with the Company and to perform services of any kind for any other person, firm or corporation.

8. Injunctive Relief. You also acknowledge and agree that if you violate paragraphs 6 and/or 7 of this agreement, and/or the terms of the EIAC Agreement, the Company will be damaged and the amount of such damage cannot be adequately measured in monetary terms. Therefore, you and the Company agree that the Company shall be entitled to injunctive relief in addition to any other remedy available at law or in equity to prevent or redress any violation of the terms of this agreement as set forth above in paragraphs 6, 7 and as provided in the EIAC Agreement. You further acknowledge and understand that any violations of paragraphs 6, 7 and/or the terms of the EIAC Agreement while you are employed by the Company may result in the immediate termination of your employment; however, it is expressly understood and agreed that nothing in this paragraph 8, in any other provision of this agreement, or in the EIAC Agreement, is intended to alter or modify the at-will nature of your employment with the Company.

9. Legal Right to Work. As required by law, your employment by the Company is contingent on you providing timely documentation as proof of your possessing a legal right to work in the United States.

10. Acceptance. You may indicate your acceptance and agreement with the terms of this offer by signing, dating and returning the original of this letter agreement and the enclosed EIAC Agreement.

 

3


Eric, we hope that you will accept our offer to join the Company and look forward to working with you.

 

Very truly yours,

Berkeley Lights, Inc.

/s/ Igor Khandros

Igor Khandros

President and CEO

I accept this offer of employment and acknowledge that I have read and agree to the terms and conditions, including the at-will nature, of my employment as set forth herein.

 

/s/ Eric D. Hobbs, Ph.D.

      5/6/2013
Signature of Eric. D Hobbs, Ph. D       Date

 

4

Exhibit 10.8

October 8, 2015

Shaun M. Holt

[#]

Dear Shaun,

We are pleased to extend to you an offer of employment with Berkeley Lights, Inc. (the “Company”) as set forth below. This written agreement supersedes and replaces any prior agreements, representations or understandings, whether written, oral or implied, between you and the Company.

1. Title and Duties. You are being offered a full-time, exempt position as the Company’s Vice President of Finance. You will be reporting to our Chief Executive Officer, Igor Y. Khandros. Your responsibilities include but are not limited to serving as a key member of the Executive Team, providing input to the CEO, Board of Directors and management peers regarding the financial implications of business decisions as well as strategic input in shaping the business, the design of long-term financial plans, including spending strategy and cost management and establishing corporate-wide process and programs to manage the Company’s growth. As a constructive and productive leader in the Company, you will be expected to lead by example by setting high standards of excellence and integrity in all your endeavors and interactions with colleagues, partners, vendors and other third parties.

2. Commencement of Employment. The commencement date of your employment will be on or before November 16, 2015, provided that you sign, date and return this offer letter indicating your acceptance. This offer, if not accepted, will expire October 9th, 2015.

3. Compensation and Benefits. As compensation for your services, you will be paid an annual salary of $360,000, paid at the rate of $30,000 per month in accordance with the Company’s standard payroll schedule. In addition., you will be eligible for the following:

a. Paid Time Off. You will be eligible to accrue paid time off according to the Company’s paid time off policy.

b. Health Care Benefits. You will be eligible to participate in the Company’s medical benefit plan as of your date of hire. The Company will pay 80% of the plan premium for the Company plan you select.

c. Equity Compensation. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 500,000 shares of the Company’s Common Stock. The exercise price per share will be equal to the fair market value per share on the date the option is granted. The option will be subject to the terms and conditions applicable to options granted under the Company’s 2011 Equity Incentive Plan (the “Plan”), as described in the Plan and the applicable Stock Option Agreement. You will vest in 25% of the option shares after 12 months of continuous service, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement. Eligibility for equity compensation and/or participation in any stock option plan shall not be construed as any assurance of continuing employment for any particular period of time.


d. Relocation Assistance. To assist you and your family with your relocation to the San Francisco Bay Area, at any time within one year of your start date, the Company will provide $30,000 in moving and relocation expense assistance, along with temporary lodging up to one month. Prior to your relocation, the Company will provide reimbursement for your business travel expense incurred.

All forms of compensation paid to you by the Company are subject to reduction to reflect applicable withholding and payroll taxes and other deductions as required by law.

4. Employee Inventions Assignment and Confidentiality Agreement. As an employee of the Company, you will have access to certain confidential information of the Company and you may, during the course of your employment, develop certain information or inventions that will be the property of the Company. As a condition of your employment, you are required to sign and return the attached Employee Inventions Assignment and Confidentiality Agreement (“EIAC Agreement”). Your execution of this offer letter shall be deemed to be your agreement to and acceptance of the attached EIAC Agreement even if for any reason you do not sign such EIAC Agreement. We wish to impress upon you that we do not want you to, and we hereby direct that you not, bring with you any confidential or proprietary material of any former employer, or violate any other obligations you may have to any former employer.

5. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any lime and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this offer. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Chief Executive Officer of the Company.

6. Outside Employment and Competitive Activities. In the event that you are initially employed as a full-time employee, or at some later date become employed as a full-time employee, during the period of your full-time employment, you are required to devote your full-time, best efforts to the interests of the Company. In the event that you are initially employed as a part-time employee, or at some later date become employed as a part-time employee, during the period of your part-time employment, you are required to devote your best efforts to the interests of the Company. Regardless of whether you are a full-time or part-time employee, you agree that you will not, without the prior written consent of the Company, engage in, or encourage or assist others to engage in, any other employment or activity that: (i) would divert from the Company any business opportunity in which the Company can reasonably be expected to have an interest; (ii) would directly compete with, or involve preparation to compete with, the current or future business of the Company; or (iii) would otherwise conflict with the Company’ s interests or could cause a disruption of its operations or prospects. Violations of this paragraph include, but are not limited to, the direct or indirect, ownership, management, operation, control, employment


by, or participation in the ownership, management, operation, or control of any business that is in any way involved with research, development, consulting, and sale of commercial products relating to the global life sciences, biotechnology, medical device and pharmaceutical industries. Excepted from this provision is ownership of not more than 10% of the outstanding shares of a publicly traded corporation.

7. Arbitration and Class Action Waiver. You and the Company agree to submit to mandatory binding arbitration any and all claims and disputes arising out of or related to your employment with the Company and any termination thereof, including, but not limited to, claims and disputes regarding employment, trade secrets, worker’s compensation retaliation claims, compensation (such as but not limited to wages, stock, stock options and other equity awards, and other ownership interests in the Company), benefits, termination, harassment, retaliation, whistleblower claims, discrimination and claims under the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Family Medical Leave Act, the Fair Labor Standards Act, the California Labor Code, the WARN Act, ERISA and any and all state statutes and common law claims covering similar subjects (collectively, “Covered Claims”). Each party may, at its, his or her option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a party’s private, proprietary, confidential or trade secret in formation. Further, to the fullest extent permitted by law, you and the Company agree that no class or collective actions can be asserted in arbitration or otherwise. All claims, whether in arbitration or otherwise, must be brought solely in your or the Company’s individual capacity, and not as a plaintiff or class member in any purported class or collective proceeding. Nothing in this Arbitration and Class Action Waiver section, however, restricts your right, if any, to file in court a representative action under California Labor Code Sections 2698, et seq.

Subject solely lo the above proviso relating to California Labor Code Sections 2698 et seq., THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO COVERED CLAIMS. THE PARTIES FURTHER WAIVE ANY RIGHTS THEY MAY HAVE TO PURSUE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION PERTAINING TO ANY CLAIMS BETWEEN YOU AND THE COMPANY.

This Agreement does not restrict your right to file administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict the employee’s ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims. The arbitration shall be conducted in the cities of either San Francisco or Oakland, California through JAMS before a single neutral arbitrator, in accordance with the JAMS employment arbitration rules then in effect. The JAMS rules may be found and reviewed at http://www.jamsadr.com/rules-employment-arbitration. If you are unable to access these rules, please let me know and the Company will provide you with a hardcopy. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based.


8. Legal Right to Work. As required by law, your employment by the Company is contingent on you providing timely documentation as proof of you possessing a legal right to work in the United States.

9. Background Check. You agree that the Company may undertake a verification of your criminal, education, driving and/or employment background. This offer can be rescinded based upon data received in the verification.

10. Entire Agreement. This offer letter, once accepted, constitutes the entire agreement between you and the Company with respect to the subject matter hereof and supersedes all prior offers, negotiations and agreements, if any, whether written or oral, relating to such subject matter. You acknowledge that neither the Company nor its agents have made any promise, representation or warranty whatsoever, either express or implied, written or oral, which is not contained in this agreement for the purpose of inducing you to execute the agreement, and you acknowledge that you have executed this agreement in reliance only upon such promises, representations and warranties as are contained herein.

11. Acceptance. You may indicate your acceptance and agreement with the terms of this offer letter by signing, dating and returning the original of this offer letter, and the enclosed EIAC Agreement.

Shaun, we hope that you will accept our offer to join the Company and look forward to working with you.

 

Very truly yours,
Berkeley Lights, Inc.

/s/ Igor Khandros

Igor Khandros

President and CEO

I accept this offer of employment and acknowledge that I have read and agree to the terms and conditions set forth above; and, I further acknowledge that no commitments, express or implied, were made to me as part of my employment offer except as specially set forth above.

 

/s/ Shaun M. Holt

  

10/19/15

Shaun M. Holt    Date

Exhibit 10.9

LOGO

February 14, 2012

Keith J. Breinlinger, PH.D

[#]

Dear Keith,

We are pleased to extend to you an offer of employment with Berkeley Lights, Inc. (the “Company”) as set forth below. This written agreement supersedes and replaces any prior agreements, representations or understandings, whether written, oral or implied, between you and the Company.

1. Title and Duties. You are being offered a full-time, exempt position as the Company’s Senior Director of Research and Development. You will be reporting to the Company’s Vice President of Systems Engineering, Steven Short. Your duties include, but are not limited to contribution to the Company’s strategic direction and strategic product plans of record. As a key member of the technical leadership team, you will participate in strategy discussions with partners and potential partners to define market-leading applications for the Company’s technologies. Your responsibilities will include active participation in and leadership of Company resources in investigating and implementing technology solutions resulting in successful commercial products and services. You will routinely participate in Company activities for the purpose of discussing evaluating and implementing best business practices intended to further the goals of the Company. Your leadership role requires you to consistently evaluate, mentor and recruit talent capable of fulfilling job requirements as defined by you, which meet the Company’s business expectations. As a constructive and productive leader in the Company, you will be expected to lead by example by setting high standards of excellence and integrity in all your endeavors, including planning, management execution, and effective communications, in all your internal and external relationships with colleagues, partners, vendors and other third parties.

2. Commencement of Employment. The commencement date of your employment will be on or before April 8, 2013 provided that you sign, date and return this letter and the attached Employee Inventions Assignment and Confidentiality Agreement to the Company indicating your acceptance, no later than February 20, 2013. This offer of employment will expire if not accepted by that date.

3. Compensation As compensation for your services, you will be paid an annual salary of $200,000.00 paid at the rate of $16,666.66 per month in accordance with the Company’s standard payroll schedule. In addition, you will be eligible for the following:


a. Health Care Benefits. You will be eligible to participate in the Company’s benefit plans in effect, which will be updated from time to time, the most current implementation was January 1, 2013.

b. Equity Compensation. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 180,000 shares of the Company’s Common Stock. The exercise price per share will be equal to the fair market value per share on the date the option is granted. The option will be subject to the terms and conditions applicable to options granted under the Company’s 2011 Equity Incentive Plan (the “Plan”), as described in the Plan and the applicable Stock Option Agreement. You will vest in 25% of the option shares after 12 months of continuous service, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement. Eligibility for equity compensation and/or participation in any stock option plan shall not be construed as any assurance of continuing employment for any particular period of time.

All forms of compensation paid to you by the Company are subject to reduction to applicable withholding and payroll taxes and other deductions as required by law.

4. Employee Inventions Assignment and Confidentiality Agreement. As a condition of your employment, you are required to sign and return the attached Employee Inventions Assignment and Confidentiality Agreement (“EIAC Agreement”). Your execution of this letter shall be deemed to be your agreement to and acceptance of the attached EIAC Agreement even if for any reason you do not sign such EIAC Agreement. In addition, the existence and terms of this offer are confidential.

5. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this offer. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Chief Executive Officer of the Company.

6. Outside Employment and Competitive Activities. In the event that you are initially employed as a full-time employee, or at some later date become employed as a full-time employee, during the period of your full-time employment, you are required to devote your full-time, best efforts to the interests of the Company. In the event that you are initially employed as a part-time employee, or at some later date become employed as a part-time employee, during the period of your part-time employment, you are required to devote your best efforts to the interests of the Company. Regardless of whether you are a full-time or part-time employee, you agree that you will not, without the prior written consent of the Company, engage in, or encourage or assist others to engage in, any other employment or activity that: (i) would divert from the Company any business opportunity in which the Company can reasonably be expected

 

2


to have an interest; (ii) would directly compete with, or involve preparation to compete with, the current or future business of the Company; or (iii) would otherwise conflict with the Company’s interests or could cause a disruption of its operations or prospects. Violations of this paragraph include but are not limited to the direct or indirect, ownership, management, operation, control, employment by, or participation in the ownership, management, operation, or control of any business that is in any way involved with research, development, consulting and, or sale of commercial products within global life sciences markets. Excepted from this provision is ownership of not more than 10% of the outstanding shares of a publicly traded corporation.

7. Non-Interference. You understand that the Company has invested substantial time and effort in assembling its present staff and personnel. Accordingly, you agree that during your employment with the Company and for one year after the termination of such employment for any reason, you will not directly or indirectly either on your own behalf or in concert with others, solicit or induce, or attempt to solicit or induce, any person who is an employee, agent, independent contractor or otherwise of the Company, to leave his or her employment or affiliation with the Company and to perform services of any kind for any other person, firm or corporation.

8. Injunctive Relief. You also acknowledge and agree that if you violate paragraphs 6 and/or 7 of this agreement, and/or the terms of the EIAC Agreement, the Company will be damaged and the amount of such damage cannot be adequately measured in monetary terms. Therefore, you and the Company agree that the Company shall be entitled to injunctive relief in addition to any other remedy available at law or in equity to prevent or redress any violation of the terms of this agreement as set forth above in paragraphs 6, 7 and as provided in the EIAC Agreement, You further acknowledge and understand that any violations of paragraphs 6, 7 and/or the terms of the EIAC Agreement while you are employed by the Company may result in the immediate termination of your employment; however, it is expressly understood and agreed that nothing in this paragraph 8, in any other provision of this agreement, or in the EIAC Agreement, is intended to alter or modify the at-will nature of your employment with the Company.

9. Legal Right to Work. As required by law, your employment by the Company is contingent on you providing timely documentation as proof of your possessing a legal right to work in the United States.

10. Acceptance. You may indicate your acceptance and agreement with the terms of this offer by signing, dating and returning the original of this letter agreement and the enclosed EIAC Agreement.

 

3


Keith, we hope that you will accept our offer to join the Company and look forward to working with you.

 

Very truly yours,

Berkeley Lights, Inc.

/s/ Igor Khandros

Igor Khandros

President and CEO

I accept this offer of employment and acknowledge that I have read and agreed to the terms and conditions, including the at-will nature, of my employment as set forth herein.

 

/s/ Keith L. Breinlinger

  

02/19/2013

Keith L. Breinlinger, PH.D.

   Date

Exhibit 10.10

LOGO

May 6, 2015

 

Stuart L. Merkadeau    Sent via Email: [#]

Dear Stuart,

We are pleased to extend to you an offer of employment with Berkeley Lights, Inc. (the “Company”) as set forth below. This written agreement supersedes and replaces any prior agreements, representations or understandings, whether written, oral or implied, between you and the Company.

1. Title and Duties. You are being offered a full-time, exempt position as the Company’s General Counsel and Secretary. You will be reporting to the Company’s Chief Executive Officer, Igor Khandros. Your duties include, but are not limited to leading the Company’s legal organization and setting global legal strategy. As a key member of the senior management team, you will participate in strategy discussions to define market-leading applications for the Company’s technologies. In addition to setting strategy, your responsibilities will include active participation in investigating and implementing biology and life science technology solutions resulting in novel commercial products and services. As a constructive and productive leader in the Company, you will be expected to lead by example by setting high standards of excellence and integrity in all your endeavors and interactions with colleagues, partners, vendors and other third parties.

2. Commencement of Employment. The commencement date of your employment will be on a date mutually agreed upon with the Company, provided that you sign, date and return this letter and the attached Employee Inventions Assignment and Confidentiality Agreement to the Company indicating your acceptance by May 15, 2015.

3. Compensation As compensation for your services, you will be paid an annual salary of $300,000.00 paid at the rate of $25,000.00 per month in accordance with the Company’s standard payroll schedule. In addition, you will be eligible for the following:

a. Health Care Benefits. You will be eligible to participate in the Company’s benefit plans in effect, which will be updated from time to time.

b. Equity Compensation. Subject to the approval of the Company’s Board of Directors or its Compensation Committee, you will be granted an option to purchase 300,000 shares of the Company’s Common Stock. The exercise price per share will be equal to the fair market value per share on the date the option is granted. The option will be subject to the terms and conditions applicable to options granted under the Company’s 2011 Equity Incentive Plan (the “Plan”), as described in the Plan and the applicable Stock


Option Agreement. You will vest in 25% of the option shares after 12 months of continuous service, and the balance will vest in equal monthly installments over the next 36 months of continuous service, as described in the applicable Stock Option Agreement. Eligibility for equity compensation and/or participation in any stock option plan shall not be construed as any assurance of continuing employment for any particular period of time.

All forms of compensation paid to you by the Company are subject to reduction to applicable withholding and payroll taxes and other deductions as required by law.

4. Employee Inventions Assignment and Confidentiality Agreement. As a condition of your employment, you are required to sign and return the attached Employee Inventions Assignment and Confidentiality Agreement (“EIAC Agreement”). Your execution of this letter shall be deemed to be your agreement to and acceptance of the attached EIAC Agreement even if for any reason you do not sign such EIAC Agreement.

5. Employment Relationship. Employment with the Company is for no specific period of time. Your employment with the Company will be “at will,” meaning that either you or the Company may terminate your employment at any time and for any reason, with or without cause. Any contrary representations that may have been made to you are superseded by this offer. This is the full and complete agreement between you and the Company on this term. Although your job duties, title, compensation and benefits, as well as the Company’s personnel policies and procedures, may change from time to time, the “at will” nature of your employment may only be changed in an express written agreement signed by you and the Chief Executive Officer of the Company.

6. Outside Employment and Competitive Activities. In the event that you are initially employed as a full-time employee, or at some later date become employed as a full-time employee, during the period of your full-time employment, you are required to devote your full-time, best efforts to the interests of the Company. In the event that you are initially employed as a part-time employee, or at some later date become employed as a part-time employee, during the period of your part-time employment, you are required to devote your best efforts to the interests of the Company. Regardless of whether you are a full-time or part-time employee, you agree that you will not, without the prior written consent of the Company, engage in, or encourage or assist others to engage in, any other employment or activity that: (i) would divert from the Company any business opportunity in which the Company can reasonably be expected to have an interest; (ii) would directly compete with, or involve preparation to compete with, the current or future business of the Company; or (iii) would otherwise conflict with the Company’s interests or could cause a disruption of its operations or prospects. Violations of this paragraph include but are not limited to the direct or indirect, ownership, management, operation, control, employment by, or participation in the ownership, management, operation, or control of any business that is in any way involved with research, development, consulting and, or sale of commercial products within global life sciences markets. Excepted from this provision is ownership of not more than 10% of the outstanding shares of a publicly traded corporation.

7. Non-Interference. You understand that the Company has invested substantial time and effort in assembling its present staff and personnel. Accordingly, you agree that during your employment with the Company and for one year after the termination of such employment for

 

2


any reason, you will not directly or indirectly either on your own behalf or in concert with others, solicit or induce, or attempt to solicit or induce, any person who is an employee, agent, independent contractor or otherwise of the Company, to leave his or her employment or affiliation with the Company and to perform services of any kind for any other person, firm or corporation.

8. Injunctive Relief. You also acknowledge and agree that if you violate paragraphs 6 and/or 7 of this agreement, and/or the terms of the EIAC Agreement, the Company will be damaged and the amount of such damage cannot be adequately measured in monetary terms. Therefore, you and the Company agree that the Company shall be entitled to injunctive relief in addition to any other remedy available at law or in equity to prevent or redress any violation of the terms of this agreement as set forth above in paragraphs 6, 7 and as provided in the EIAC Agreement. You further acknowledge and understand that any violations of paragraphs 6, 7 and/or the terms of the EIAC Agreement while you are employed by the Company may result in the immediate termination of your employment; however, it is expressly understood and agreed that nothing in this paragraph 8, in any other provision of this agreement, or in the EIAC Agreement, is intended to alter or modify the at-will nature of your employment with the Company.

9. Legal Right to Work. As required by law, your employment by the Company is contingent on you providing timely documentation as proof of your possessing a legal right to work in the United States.

10. Acceptance. You may indicate your acceptance and agreement with the terms of this offer by signing, dating and returning the original of this letter agreement and the enclosed EIAC Agreement.

Stuart, we hope that you will accept our offer to join the Company and look forward to working with you.

 

Very truly yours,
Berkeley Lights, Inc.
/s/ Igor Khandros
Igor Khandros
President and CEO

I accept this offer of employment and acknowledge that I have read and agree to the terms and conditions, including the at-will nature, of my employment as set forth herein.

 

/s/ Stuart L. Merkadeau

   

May 16, 2015

Stuart L. Merkadeau

   

Date

 

3

Exhibit 10.12(a)

LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation 1 Building

5858 Horton St.

Emeryville, California

THIS LEASE (“Lease”), dated for reference purposes as of November 3,2014 (“Effective Date”), is entered by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord, on the basis of the following:

A. Tenant is a party to that certain lease dated October 30, 2012 (the “ESE Lease”) for Suites 370 and 380 at the project commonly referred to as the EmeryStation East Building, located at 5885 Hollis Street in Emeryville, California (the “ESE Building”). The landlord under the ESE Lease is E S East, LLC, a California limited liability corporation.

B. Landlord agrees to lease to Tenant, and Tenant hereby agrees to lease from Landlord, pursuant to the terms and conditions set forth below, a total of 18,276 rentable square feet located on the 3rd floor of the EmeryStation 1 Building located at 5858 Horton Street, Emeryville, California 94608. The space being leased, as such space is more specifically defined in Exhibit A attached hereto and incorporated by reference herein, shall be referred to as, and shall constitute for all purposes under this Lease, the “Premises”.

C. For their mutual convenience, Landlord and Tenant have elected to utilize the terms and conditions contained in the ESE Lease to; govern Tenant’s lease of the Premises, the terms of such ESE Lease modified as set forth below. A copy of the ESE Lease is attached hereto and all relevant terms and conditions thereof, to the extent not modified by this Lease, are incorporated herein by reference. The terms of the ESE Lease, as modified by the terms and conditions set forth below, shall together be referred to as the “Lease” for all purposes hereunder from and after the Effective Date.

1. Section 1.1 of the ESE Lease shall be modified as follows:

A. The “Building” described in the Lease shall be EmeryStation 1. The “Address” of the Building is 5858 Horton Street, Emeryville, California 94608.

B. The “Landlord” under the Lease shall be Emery Station Joint Venture, LLC, a California limited liability company. The addresses for notices to Landlord shall be those given for the landlord under the ESE Lease.

C. The “Tenant” and “Current Address” shall be as stated in the ESE Lease.

D. The “Date of Lease” shall be the Effective Date.

E. The “Lease Term” shall be five (5) years, commencing upon the Commencement Date and expiring on the Expiration Date, as each term is defined below.


F. The “Commencement Date” of this Lease shall be the earlier to occur of: a) Tenant’s commencement of business operations in the Premises, and b) fifteen (15) days after Landlord notifies Tenant in writing that it has achieved Substantial Completion of the Landlord Work (as such terms are defined in Exhibits B and C attached hereto and incorporated by reference herein). Tenant hereby agrees to relocate its operations in their entirety out of the ESE Building and into the Premises no later than fifteen (15) days after the date of Substantial Completion of the Landlord Work. Tenant’s failure to do so shall constitute a Default under this Lease.

Notwithstanding the above, Landlord and Tenant acknowledge and agree that based on the schedule for completion of Tenant’s Premises, it may be possible and advantageous to have Tenant occupy portions of the Premises in stages, as such may be substantially completed and legally occupiable, while other portions of the Premises are still being improved with the Landlord’s Work applicable to those specific spaces. In such event, Landlord and Tenant agree to make commercially reasonable efforts to pursue such a staged move-in, so long as the final and complete move-in by Tenant is not delayed beyond the date contemplated above. If such a staged move-in is accomplished, the Lease Term as it applies to the respective area(s) Tenant occupies (including the pro-rata share of Monthly Base Rent and other charges under the Lease) will be commenced as of the date of Tenant’s move-in to said portion(s) of the Premises and the Expiration date of the Lease shall be a full five years (plus any partial month if the commencement date of the final space delivered to Tenant does not occur on the first day of a calendar month) after the Commencement Date applicable to that specific last-delivered portion of the Premises.

G. The “Expiration Date” of this Lease shall be the last day of the sixtieth (60th) full calendar month following the Commencement Date (subject to the provisions of Section l.F. above). By way of example, if the Commencement Date were to be December 15, 2014, the Expiration Date would be December 31st, 2019.

H. The “Monthly Base Rent” for the Premises shall be as follows:

 

Period

   Monthly Base Rent  

Year 1 of Lease Term*

   $ 68,535.00  

Year 2

   $ 73,104.00  

Year 3

   $ 75,845.00  

Year 4

   $ 79,500.00  

Year 5

   $ 82,242.00  

 

*

Year 1 of the Lease Term includes the first full twelve (12) calendar months following the Commencement date plus any partial month in the event the Commencement Date is not the first (1st) day of a calendar month.

As specified in the terms of the ESE Lease, Tenant shall be obligated to pay as Additional Rent one hundred percent (100%) of all utilities associated with the Premises, including the production of HVAC services therefor. Commencing on the later of January 1, 2015 and the Commencement Date, Tenant shall also be obligated to pay increases in all other operating expenses and taxes above a Base Year of 2014.

I. The “Rentable Area of the Premises” is 18,276 rentable square feet.


J. The “Suite Number” of the Premises is 320.

K. The “Security Deposit” shall be $75,297.12, equal to one (1) month’s Base Rent, calculated at the rate of $4.12 per rentable square foot per month. Tenant shall remit a $41,963.78 portion of the Security Deposit to Landlord within five (5) days after Tenant’s execution of this Lease, and shall remit the remaining $33,333.34 balance of the Security Deposit upon the earlier to occur of: a) seven (7) business days following Tenant’s opening for business in the Premises, and b) thirty-seven (37) days after Landlord’s Substantial Completion of the Landlord Work.

L. The “Tenant’s Use of Premises” shall be as stated in the ESE Lease.

M. “Parking” shall mean up to fifty (50) unreserved parking spaces in the Terraces Garage. Tenant shall pay Landlord’s quoted rates for all parking, as more specifically outlined in Section 2.5 of the ESE Lease, except that through May 31, 2015 parking charges will be discounted by twenty-seven point four percent (27.4%) from Landlord’s quoted rates (reflecting the relationship of a $2.99 initial rental rate on a portion of the space to the base $4.12 rental rate).

N. Landlord and Tenant represent and warrant to the other that it has represented itself in this transaction and that no brokerage commission or other such fee shall be due and payable by Landlord to any representative of Landlord or Tenant as a result hereof.

O. Regarding “Tenant Improvements”: Tenant will accept the Premises in its current as-is condition, subject only to Landlord’s obligation, at Landlord’s sole cost, to make the improvements thereto described in Exhibit B attached hereto (the “Landlord Work”) and pursuant to the terms of the Work Letter attached as Exhibit C hereto (the “Work Letter”).

2. DEFINITIONS:

A. The following shall be added at the end of the second sentence of the definition of “Operating Expenses” in the ESE Lease:

“; (xi) the costs and expenses incurred, in resolving disputes with other tenants, other occupants, or prospective tenants or occupants of the Building, collecting rents or otherwise enforcing leases of the tenants of the Building beyond the normal monthly administration of leases by property management personnel; (xii) costs incurred in connection with the presence of any Hazardous Materials, except to the extent caused by the storage, use, release or emission of the Hazardous Material in question by Tenant or any Tenant Party; (xiii) the costs of repairs, alterations, and maintenance necessitated by the gross negligence or willful misconduct of Landlord or its agents, employees or contractors, or repairs, alterations and maintenance necessitated by the gross negligence or willful misconduct of any other tenant or occupant of the Building, or any of their respective agents, employees or contractors; (xiv) interest or penalties due to the late payment of taxes, utility bills or other such costs; (xv) any amount payable by Landlord by way of indemnity or for damages or which constitute a fine or penalty; (xvi) any cost for overtime or other expenses to Landlord in curing defaults; (xvii) the costs, including fines, penalties and legal fees, incurred due to violations by Landlord, its employees, agents or contractors, or any other tenant or occupant of the Building, of building codes, any governmental rule or requirement or the terms and conditions of any lease pertaining to the Building or any other contract, except that the cost of Landlord’s compliance with building codes enacted following the Effective Date hereof


shall be valid Operating Expenses; and (xviii) bad debt expenses and charitable contributions and donations. Landlord agrees that (x) Landlord will not collect or be entitled to collect more than one hundred percent (100%) of the increases in Operating Expenses and Taxes actually paid by Landlord in connection with the operation of the Building in any calendar year, and (xi) Landlord shall make no profit from Landlord’s collection of Operating Expenses or Taxes. Landlord hereby agrees to amortize the cost of any capital replacement or improvement (including any capital replacement or improvement required to comply with changes in applicable law) over the useful life of the respective capital item as determined in accordance with generally accepted real estate accounting principles consistently applied, along with an eight percent (8%) imputed interest rate, and Tenant shall pay Tenant’s Share of such cost until the earlier of the expiration of the useful life or the expiration of the Term.”

B. The following sentence shall be added to the definition of “Substantially Complete or Substantial Completion”:

“As it regards Landlord’s Work as defined in the Lease and Workletter, Substantial Completion (and the grammatical variations of such term) shall require: (i) that there are no items of work incomplete which would materially adversely impact Tenant’s intended use of the Premises (or portion thereof, in the event of a staged move-in such as is described in Section F above, (ii) Landlord has delivered of legal possession of the Premises and Landlord’s Work (or portion thereof, in the event of a staged move-in) to Tenant, and (iii) the City of Emeryville Building Department has allowed legal occupancy of the Premises and Landlord’s Work (or portion thereof, in the event of staged move-in), as evidenced by a temporary certificate of occupancy, signed-off job card, or other such documentation normally used by the City of Emeryville to evidence allowed occupancy.

C. The following shall be added at the end of the definition of “Taxes” in the ESE Lease:

“Taxes also shall not include (i) penalties and interest, other than those attributable to Tenant’s failure to comply timely with its obligations pursuant to this Lease, or (ii) any Taxes in excess of the amount which would be payable if such tax or assessment expense were paid in allowable installments over the longest possible term,”.

3. EXPANSION: For the avoidance of doubt, Section 2.6 of the ESE Lease regarding Tenant’s Expansion Right, including the right by Tenant to terminate the Lease Term early under certain conditions, which right is referred to in the Lease as Tenant’s Early Termination Right, shall continue to apply with the following modifications:

A. Landlord and Tenant hereby agree that the Additional Space, as defined in Section 2.6 of the Lease, does not have to be contiguous to the Premises nor must it be a single, larger space to which Tenant would relocate, but that the Additional Space can be located in the Building itself or in another building located in Emeryville that is owned or controlled by Landlord or an affiliate of Landlord.

B. Landlord and Tenant hereby agree that it will be commercially reasonable for the lease term applicable to the Additional Space to be at least five (5) years.


4. RENEWAL OPTION: Section 2.7 of the ESE Lease regarding Tenant’s Renewal Option shall continue to apply, allowing Tenant to extend the term of the Lease for an additional five (5) years commencing on the first day immediately following the Expiration Date specified above.

5. STATEMENT OF LANDLORD: The following shall be added at the end of Section 4.2:

“Notwithstanding anything to the contrary contained in this Lease, if Landlord has not delivered a Statement for any calendar year during the Term (including the calendar year in which the Lease terminates) by the date that is twelve (12) months after the end of the calendar year in question, Tenant shall not be obligated to pay Tenant’s Share of Operating Expenses or Taxes in excess of the estimated Operating Expenses and Taxes paid by Tenant as Rent Adjustment Deposits for such calendar year. Landlord shall be able to adjust a Statement after said 12-month period only to the extent of valid costs and expenses which Landlord had no knowledge of earlier.”

6. BOOKS AND RECORDS:

 

  A.

Section 4.3 of the ESE Lease shall be revised as follows: 1) the 60-day time period in the 6th line shall be changed to 90 days, 2) the 90-day time period in the 10th line shall be changed to 120 days, and the 90-day time period in the 15th line shall be changed to 120 days.

B. There shall be added at the end of the third to last sentence of Section 4.3 of the ESE Lease, after the words “(“Confidentiality Requirement”)”, the following: “, except to the extent required by applicable law and court order.”

7. SECURITY DEPOSIT: There shall be added in line 3 of Article 5 of the ESE Lease, after the words “any default of Tenant under this Lease”, the words “beyond applicable notice and cure periods,”.

8. ELECTRICAL SERVICES: There shall be deleted from the first sentence of Sections 6.2(a) and (b) of the ESE Lease the words “and Tenant has paid all Rent then due”.

9. DELAYS IN FURNISHING SERVICES: The following shall be added at the end of Section 6.5 of the ESE Lease:

“Notwithstanding anything to the contrary contained in this Section 6.5, if all or any material portion of the Premises are made untenantable and are not actually used by Tenant for a period in excess of three (3) consecutive business days as a result of a failure, delay or change in any service due to Landlord’s gross negligence or willful misconduct, and Tenant has given Landlord notice of such failure, delay or change, then, commencing with the fourth (4th) business day after such notice and ending on the day the service has been restored, Tenant shall be entitled to an abatement of Monthly Base Rent. If the entire Premises has not been rendered untenantable by such failure, delay or change, the amount of abatement shall be equitably prorated.”

10. MONITORING BY LANDLORD: The first sentence of 7.1(d)(8) of the ESE Lease entitled “Monitoring by Landlord” hereby is revised in its entirety as follows:

“Landlord reserves the absolute right to monitor, in Landlord’s reasonable discretion and at Landlord’s sole cost (except in the case of a breach of any of Tenant’s obligations under this Article 7, in which event such monitoring costs may be charged back to entirely to Tenant and


shall be reimbursed by Tenant to Landlord within twenty (20) days after receipt of written demand by Landlord from time to time, accompanied by supporting documentation reasonably evidencing the costs for which such reimbursement is claimed), at such times and from time to time as Landlord in its reasonable discretion may determine, through consultants engaged by Landlord or otherwise as Landlord in its reasonable discretion may determine, (x) all aqueous and atmospheric discharges and emissions from the Premise during the Term by Tenant or a Tenant Party; (y) Tenant’s compliance and the collective compliance of all tenants in the Building with the requirements and restrictions relating to the occupancy classification of the Building (including, but not limited to, Hazardous Materials inventory levels of Tenant and all other tenants in the Building; and (z) Tenant’s compliance with all other requirements of this Section.”

11. ASSIGNMENT AND SUBLETTING:

A. The first two grammatical phrases in the first sentence of Section 10.1(a) of the ESE Lease shall be revised to state as follows: “Without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed,...”

B. The second to last sentence of Section 10.1(a) of the ESE Lease hereby is revised to state in its entirety as follows: “In no event may Tenant sublease any portion of the Premises or assign the Lease to any other tenant of the Building unless Landlord does not have space in the Building to satisfy the tenant’s space needs.”

C. Section 10.1(d) of the ESE Lease hereby is revised to state in its entirety as follows:

“(d) So long as Tenant is not entering into a transaction described herein for the purpose of avoiding or otherwise circumventing the remaining terms of this Article, Tenant may, subject to Section 10.5, assign its entire interest under this Lease or sublease all or a portion of the Premises, without the consent of Landlord, to (i) an Affiliate; or (ii) a successor to Tenant by purchase or other acquisition of Tenant’s capital stock or substantially all of Tenant’s assets, or by merger, consolidation or reorganization (each of the foregoing hereinafter sometimes collectively shall be referred to as “Permitted Transfers”, and any person to whom any Permitted Transfer is made hereinafter sometimes shall be referred to as a “Permitted Transferee”); provided that all of the following conditions are satisfied: (1) Tenant is not then in Default under this Lease; (2) Tenant shall give Landlord written notice at least fifteen (15) days prior to the effective date of the proposed transfer (unless applicable securities laws or; a confidentiality agreement prohibit notice prior to consummation of the transaction, in which case Tenant shall provide notice to Landlord as soon thereafter as reasonably practicable), together with the information required hereunder and such entity shall expressly assume Tenant’s obligations hereunder; (3) with respect to an assignment to an Affiliate, Tenant continues to have a net worth equal to or greater than the greater of: a) Tenant’s net worth as of the Effective Date of this Lease, and b) Tenant’s net worth immediately prior to the proposed assignment; and (4) with respect to a purchase, merger, consolidation or reorganization which results in Tenant ceasing to exist as a separate, legal entity, Tenant’s successor shall have a net worth equal to or greater that the greater of: a) Tenant’s net worth as of the Effective Date of this Lease, and b) Tenant’s net worth immediately prior to the proposed transaction. For purposes of this Lease, a transfer or issuance of Tenant’s stock over the New York Stock Exchange, the American Stock Exchange, or NASDAQ or by virtue of a private placement with a venture capital firm or other equity investor wherein such venture capital firm or other equity investor receives stock in Tenant shall


not be deemed an assignment, subletting or other transfer of this Lease or the Premises requiring Landlord’s consent. Any right of Landlord to recapture the Premises or receive excess rentals shall not apply to a Permitted Transfer.”

D. Section 10.2 of the ESE Lease shall be revised in its entirety as follows:

“Landlord shall have the option to terminate this Lease with respect to that portion of the Premises proposed to be sublet or subject to assignment. Landlord shall notify Tenant of Landlord’s election in writing within fifteen (15) days after receipt of the information required by Section 10.1(a) above. If Landlord elects to recapture, Tenant shall surrender possession of that portion of the Premises that is the subject of the recapture on the date that is the proposed effective date of such sublease or assignment, surrendering it in the condition otherwise required of Tenant upon the expiration of the Term. Effective as of the date of such recapture of any portion of the Premises, the Monthly Base Rent, Rentable Area of the Premises and Tenant’s Share shall be adjusted accordingly. Notwithstanding anything to the contrary contained in this Lease, if Landlord exercises Landlord’s recapture right hereunder, Tenant shall have the right, by written notice to Landlord within five (5) business days after receipt of Landlord’s written recapture notice, to rescind its request for consent, in which case this Lease shall remain unmodified and in full force and effect.”

E. Regarding Section 10.6 of the ESE Lease, the total of Landlord’s reasonable attorneys’ and professional fees and Processing Costs shall not exceed $2,000.00 per request for consent.

12. DEFAULT AND REMEDIES:

 

  A.

The following sentence shall be added to Section 11.1(1) of the Lease: “Landlord agrees to provide a written notice to Tenant of Landlord’s intent to file an unlawful detainer action against Tenant at least three (3) days prior to Landlord’s actual filing thereof.”

B. There shall be added at the end of Section 11.1(2) of the ESE Lease the following: “; provided, however, that if the default is incapable of cure within fifteen (15) days, Tenant shall not be in default hereunder if Tenant commences the cure within the fifteen (15)-day period and thereafter diligently prosecutes the cure to completion;”

C. Section 11.1(9) of the ESE Lease hereby is deleted in its entirety.

D. Section 11.2(h) of the ESE Lease hereby is revised in its entirety as follows:

“No delay or omission in the exercise of any right or remedy of Landlord or Tenant upon any Default by the other, and, with respect to Landlord only, no exercise by Landlord of its rights pursuant to Section 25.25 to perform any duty which Tenant fails timely to perform, shall impair any right or remedy or be construed as a waiver. No provision of this Lease shall be deemed waived by Landlord or Tenant unless such waiver is in writing signed by the waiving party. The waiver by Landlord or Tenant of any breach of any provision of this Lease shall not be deemed a waiver of any subsequent breach of the same or any other provision of this Lease.”

13. HOLDING OVER: The first sentence of Article 13 of the ESE Lease hereby is revised to state in its entirety as follows: “In the event that Tenant holds over in possession of the Premises


after the Termination Date, Tenant shall pay Landlord 150% of the Monthly Base Rent payable for the month immediately preceding the holding over, together with 100% of the Rent Adjustment Deposits and 100% of all other Rent payable for such period.”

14. DAMAGE BY FIRE OR OTHER CASUALTY:

 

  A.

There shall be added at the end of Section 14.1 (b) of the ESE Lease the following: “; provided, however, that if Landlord has not completed the repairs and restoration within three hundred (300) days after the date of the damage, Tenant shall have five (5) days following the three-hundredth (300th) day to deliver written notice to Landlord that Tenant elects to terminate this Lease unless Landlord shall have completed the repairs and restoration within a period of thirty (30) days following the date Landlord receives Tenant’s written notice. Landlord’s completion of repairs and restoration within that additional thirty (30) day period shall cause Tenant’s termination notice to be null and void.

C. There shall be added at the end of subsection (i) in Section 14.1(d) of the ESE Lease the following: “(unless proceeds are not available to Landlord because Landlord failed to carry the insurance required by Section 16,3 below, in which case Landlord shall not be relieved of its obligation to repair or restore pursuant to this Article 14);”.

D. The first grammatical phrase of the first sentence of Section 14.3 of the ESE Lease is revised to state in its entirety as follows: “Except for the gross negligence or willful misconduct of Tenant or its agents, employees, contractors or invitees,...”.

15. ESTOPPEL CERTIFICATE:

A. In the first sentence of Section 20.2, the word “business” shall be inserted between the words “ten (10)” and “days”.

16. RELOCATION: Article 21 of the ESE Lease hereby is deleted in its entirety.

17. MORTGAGEE PROTECTION: In the second sentence of Section 21.1 of the ESE Lease, the words “upon request of the Mortgagee or ground lessor, as the case may be,” hereby are deleted.

18. EXHIBITS: Exhibits A and B of the ESE Lease hereby are deleted in their entirety.

19. MISCELLANEOUS:

 

  A.

Section 25.4 of the Lease is hereby revised in its entirety as follows:

“Landlord and Tenant acknowledge and agree that the exchange of drafts of this Lease does not create a binding obligation between the parties. This Lease shall not become effective as a lease or otherwise until executed and delivered by both Landlord and Tenant.”

 

  B.

A new Section 25.21 shall be added to the Lease as follows:

“Pursuant to California Civil Code Section 1938, Landlord hereby notifies Tenant that as of the Effective Date the Premises has not undergone inspection by a


“Certified Access Specialist” to determine whether the Premises meets all applicable construction-related accessibility standards under California Civil Code Section 55.53. Tenant shall not be responsible for any cost incurred by Landlord if Landlord is required to comply with any Landlord Work construction-related accessibility standards applicable to the Building.)”

 

  C.

The following shall be added at the end of Section 25.8 of the Lease:

“For purposes of this Section, “Landlord’s equity interest in the Property” shall include rents paid by tenants, insurance proceeds, condemnation proceeds, and proceeds from the sale of the Building (collectively, “Owner Proceeds”); provided, however, that Tenant shall not be entitled to recover Owner Proceeds from any Landlord Parties (other than Landlord) or any other third party after they have been distributed or paid to such party; provided further, however, that nothing in this sentence shall diminish any right Tenant may have under Law, as a creditor of Landlord, to initiate or participate in an action to recover Owner Proceeds from a third party on the grounds that such third party obtained such Owner Proceeds when Landlord was, or could reasonably be expected to become, insolvent or in a transfer that was preferential or fraudulent as to Landlord’s creditors.

20. TEMPORARY SPACE: In order to meet Tenant’s need for additional space, Landlord hereby agrees to lease to Tenant, and Tenant agrees to lease from Landlord, temporary; spaces in the Building for the period commencing on the Effective Date and terminating on the; Commencement Date (the “Temporary Spaces”). The Temporary Spaces, to be identified as Suites 255 and 237, are more specifically defined on Exhibit D attached hereto and incorporated by reference herein. Tenant agrees to accept the Temporary Spaces in their then as-is condition, with no obligation on behalf of Landlord to improve it in any way. Tenant shall pay a fixed rent for the Temporary Spaces in the amount of $3.75 per square foot per month per month (the, “Temporary Space Monthly Rent”), which shall be pro-rated for any partial month. Tenant agrees to vacate the Temporary Spaces and return possession thereof to Landlord, in broom clean condition and decommissioned and decontaminated as necessary, within ten (10) days after the Commencement Date of this Lease. Failure to do so shall constitute a Default hereunder. Other than those terms specifically outlined above, all of other terms and conditions of this Lease shall apply to Tenant’s lease of the Temporary Spaces. Tenant understands and acknowledges that, in the event Landlord reasonably requires possession of the Temporary Spaces to consummate a lease with another third-party tenant, Landlord shall have the right to substitute alternate premises for the Temporary Spaces with ten (10) days’ advance written notice to Tenant, so long as the alternate premises is located in the Building or in the building located at 5885 Hollis Street in Emeryville, CA and is reasonably similar to the Temporary Spaces in utility and functionality.

IN WITNESS WHEREOF, the parties have executed this Lease as of the latest of the dates set forth below.

 

TENANT:     LANDLORD:
Berkeley Lights, Inc.,    

Emery Station Joint Venture LLC

a Delaware corporation    

a California limited liability company

By:  

/s/ Igor Khandros

    By:  

/s/ Richard Robbins

Print Name:  

Igor Khandros

    Print Name:  

Richard K. Robbins


EXHIBIT A

PREMISES


LOGO


EXHIBIT B

LANDLORD WORK

Landlord shall, at its sole cost and expense and pursuant to the terms of the Workletter attached to the Lease as Exhibit C, alter the existing Premises by constructing the Landlord’s Work (as such term is defined in the Lease and Workletter) pursuant to the Design Documents listed below and to the other terms listed below:

 

   

Office areas will be built out to Building Standards, including all new paint and carpeting plus necessary millwork for kitchenette, copy/fax areas, etc.

 

   

Lab areas will be altered according to the space plans.

 

   

Existing benches that are to remain will be kept as-is. New benches shown will re-use existing benches removed from other areas to the extent possible. In areas where benches are removed, Landlord will relocate whatever electrical, gas and vacuum outlets that had been on the benches up to panels accessible in the ceiling.

 

   

Landlord will supply “ring and string” for Tenant’s voice/data vendor to use to install Tenant’s cabling. All furniture and other FF&E will be paid for and installed by Tenant.

 

   

Notwithstanding the above, Tenant shall be responsible for the costs associated with the necessary alterations to the existing space designated on the Design Drawings as “Consumables Manufacture”. Landlord and Tenant agree and acknowledge that Tenant may wish to alter the design details of the Consumables Manufacture area from what is currently shown on the design Drawings. Tenant, at its election, shall either pay for the costs with its own funds or may, at its election, elect to have Landlord amortize some or all of the associated cost over the initial Term of the Lease, such amortization to include an annual interest rate of 8.0% compounded monthly and to constitute Additional Rent under the Lease. By way of example, if the costs associated with the alterations of the Consumables Manufacture area from its existing condition totaled $200,000, Tenant could pay said $200,000 or could ask Landlord to amortize that total amount or any portion thereof as described above.

DESIGN DRAWINGS

Those drawings by DGA dated October 28, 2014 and numbered as follows:

G1001, G1002, G1003, G1004, A-100X, AD101, AE101, AF101, AR101, AQ101, AE211, AE511, AE512, AE521, AE531, M000, M001, M900, M101, M201, M301, M600, M800, E0-0, El-0, E2-0, E2-2, E3-0, E5-0, E6-0, E6-1, P000, P101, P102, P201, P202


EXHIBIT C

WORKLETTER AGREEMENT

(TURN-KEY)

1. Defined Terms. Capitalized Terms used in this Workletter shall have the same meanings set forth in the Lease except as otherwise specified herein and except for Terms capitalized in the ordinary course of punctuation. For purposes of this Workletter, the following capitalized terms have the following meanings:

1.1. “Landlord Work” means the construction and installation of the Landlord’s Work, including the items set forth on Exhibit B attached to the Lease.

1.2. “Design Documents” means the layout plans and specifications for the Landlord’s Work to be constructed in the Premises which are the final product of the preliminary space planning and which (i) will be based upon and consistent with, among other things, the preliminary space plan and specifications, attached as Exhibit B to this Lease (the “Conceptual Plans”); and (ii) comply with all Laws as applicable and as interpreted at the time of construction of the Landlord’s Work.

1.3. “Construction Drawings” means the final architectural plans and specifications, and engineering plans and specifications, for the Landlord’s Work to be constructed in the Premises, and shall be based upon and consistent with the Design Documents.

1.4. “Landlord’s Work” means all of the initial improvements to be constructed as shown on the Construction Drawings, as they may be modified as provided herein.

2. Design Matters.

2.1. Landlord and Tenant have approved a design team consisting of DG Architects, as architect (“Architect”) and Randall Lamb Associates as Mechanical/Electrical/Plumbing designer (“MEP Designer”). The Architect and MEP Designer shall be retained by Landlord and referred to collectively herein as the “Design Group.” The Design Group shall be responsible to complete the Construction Drawings in accordance with all applicable Laws and shall submit the Construction Drawings to the City of Emeryville for review and permit,

2.2. Landlord shall cause, and Tenant shall fully cooperate with, the Design Group to complete Design Documents and Construction Drawings in as an efficient and timely manner as possible. Any failure by Tenant to supply information and/or to provide authorizations or approvals within five (5) business days of receipt of Landlord’s written request (including requests by electronic mail) shall constitute a Tenant Delay. Tenant shall be prohibited from including in the Design Drawings and/or the Construction Drawings, materials or equipment that require unusually long fabrication or delivery times (“Long Lead Time Items”). The Design Drawings submitted by the Design Group to Landlord shall be submitted to Tenant for its prompt review and approval, which approval shall not be unreasonably withheld or delayed if the Design Drawings are in material conformance with the Conceptual Plans. The


Construction Drawings submitted by the Design Group to Landlord shall be submitted to Tenant for its prompt review and approval, which approval shall not be unreasonably withheld or delayed if the Construction Drawings are in material conformance with the Design Drawings. The Construction Drawings so approved by Tenant shall be referred to herein as the “Approved Construction Drawings.”

2.3. Tenant shall be responsible for whether the design and function of the Landlord’s Work are suitable for the Tenant’s needs.

3. Construction; Landlord’s Work Costs.

3.1. Tenant Improvement Costs. The cost of the Landlord’s Work (“Tenant Improvement Costs”) shall be paid by Landlord. The Tenant Improvement Costs shall include, without limitation, (a) the costs of the Design Group and any other consultants retained by Landlord in connection with the preparation of Design Documents and Construction Drawings, and engineering costs associated with completion of the State of California energy utilization calculations under Title 24 legislation; (b) all costs of obtaining from the City of Emeryville and any other governmental authority, approvals, building permits and occupancy permits with respect to the Landlord’s Work; (c) all costs of interior design and finish schedule plans and specifications including as-built drawings with respect to the Landlord’s Work; (d) all costs of procuring, installing and constructing the Landlord’s Work, including: (i) the cost of all on-site supervisory and administrative staff, office, equipment and temporary services rendered or provided by Contractor in connection with, and reasonably allocable to, construction of the Landlord’s Work; and (ii) the cost of any services or utilities made available by Landlord; and (e) Landlord’s construction management fee, which shall equal four percent (4%) of the first $200,000.00 of Landlord’s Work Costs and two percent (2%) of the Landlord’s Work Costs in excess of $200,000.00. Landlord and Tenant hereby agree that, notwithstanding Section 3.1(e) above, the Landlord construction management fee that shall be applicable to any Change Order for which Tenant is responsible shall be equal to three percent (3%) of the hard cost (i.e. actual construction cost, as opposed to soft costs such as design, permitting, etc.).

In no event shall the Tenant Improvement Costs include (i) any costs of procuring or installing in the Premises any trade fixtures, equipment, furniture, furnishings, telephone equipment, or other personal property (“Personal Property”) to be used in the Premises by Tenant, and the cost of such Personal Property shall be paid by Tenant, or (ii) any costs or expenses of any consultants retained by Tenant with respect to design, procurement, installation or construction of improvements or installations, whether real or personal property, for the Premises. Tenant Improvement Costs also shall not include the following: (i) any work to the Building or Premises other than the Landlord’s Work; (ii) premiums or the incremental portion thereof for insurance policies required under the Lease to be procured by Landlord; (iii) costs associated with bonding any contractors, subcontractors or vendors; (iv) utilities consumed during the construction of the Landlord’s Work; (v) charges and expenses for changes to the Approved Construction Documents that have not been approved by Tenant; (vi) wages, labor and overhead for over-time and premium time (unless approved in writing by Tenant); (vii) additional costs and expenses incurred by Landlord on account of any contractor’s or subcontractor’s default or construction defects; (viii) principal, interest and fees for construction and permanent financing; (ix) fees or charges for construction management, supervision, profit,


overhead or general conditions by Landlord or any third party other than the Design team and/or contractors who are directly involved in the Landlord’s Work; (x) costs for which Landlord receives reimbursement from others, including, without limitation, insurers and warrantors; (xi) penalties and late charges attributable to Landlord’s failure to pay the Tenant Improvement Costs; and (xii) attorneys’, experts’ and other fees and costs in connection with contracts and disputes, and (xiii) costs arising from or in connection with the presence of Hazardous Materials on the Premises or Building which are included in the definition of “Landlord’s Contamination” pursuant to Section 7.1(d)(11) of the Lease.

3.2. Limitations of Landlord’s Obligations. The Landlord’s Work shall be constructed as set forth in this Workletter, substantially in compliance with the Construction Drawings, in a good and workmanlike manner, free of defects and using materials and equipment of good quality. Tenant understands and acknowledges that Landlord shall be able to re-use items currently installed in the existing Premises that are of good quality and functionality. Through Landlord, Tenant shall have the benefit of any and all warranties received by Landlord from contractors and suppliers performing any of the Landlord’s Work. Upon Substantial Completion of the Landlord’s Work, Landlord shall have no further obligation to construct improvements or construct modifications to or changes in the Landlord’s Work, except to complete the punchlist of Landlord’s Work remaining to be completed or correct any part thereof that is defective or is otherwise not in compliance with the Approved Construction Drawings and any approved modifications thereof, as provided in the Lease, The punchlist of remaining Landlord Work shall be prepared by Tenant no later than ten (10) days after Substantial Completion of the Landlord’s Work. Landlord shall make commercially reasonable efforts to have its general contractor complete all punchlist items within thirty (30) days thereafter. Landlord, at no cost to Tenant, shall be responsible for the cost of correcting any clear latent defect in Landlord’s Work for a period of six (6) months following the date of Substantial Completion.

4. Changes. If Tenant shall request any change, addition or alteration in the Approved Construction Drawings, Landlord shall, within five (5) business days, give Tenant a written estimate of (a) the cost of engineering and design services and the construction contractor services to prepare a change order (the “Change Order”) in accordance with such request, (b) the cost of work to be performed pursuant to such Change Order, and (c) the time delay expected because of such requested Change Order. Within three (3) business days following Tenant’s receipt of the foregoing written estimate, Tenant shall notify Landlord in writing whether it approves such written estimate. If Tenant approves such written estimate, Tenant shall accompany such approval with a good check made payable to the order of Landlord in the amount of the estimated cost of preparing the Change Order and performing the work specified therein, and the foregoing shall constitute Landlord’s authorization to proceed. If such written authorization and check are not received by Landlord within such three (3) business day period, Landlord shall not be obligated to prepare the Change Order or perform any work in connection therewith. Upon completion of the work of the Change Order and submission of the final cost thereof by Landlord to Tenant, Tenant shall promptly pay to Landlord the amount, if any, of the actual cost of the Change Order in excess of the estimated costs thereof previously paid by Tenant. Any delay in Substantial Completion of the Landlord’s Work resulting from such request for a Change Order or from the changes so made or necessitated shall be chargeable as Tenant Delay.


6. Tenant Delay. If the Substantial Completion of the Landlord’s Work in the Premises is delayed due to Tenant Delay, the provisions of the Lease shall apply.

In the event of any dispute between Landlord and Tenant regarding (i) the occurrence or alleged occurrence, or the duration, of any Tenant Delay, or (ii) Substantial Completion of the Landlord’s Work, the parties agree to attempt to resolve such dispute promptly and in good faith; provided, however, that if the parties are unable to resolve such dispute within ten (10) days after such dispute arises, the parties shall retain an independent third-party architect familiar with construction in the vicinity of the Project of tenant improvements similar in nature to the Landlord’s Work to arbitrate such dispute, which third-party arbitrator shall have the authority to make a final and binding resolution of such dispute, and the parties shall share equally the fees and charges of such arbitrator.

7. Entry by Tenant. Tenant may enter the Premises during construction of the Landlord’s Work and prior to the Commencement Date in accordance with of the Lease so long as such entry is not a material hindrance of the prosecution of Landlord’s Work by the general contractor.

8. Force and Effect. The terms and conditions of this Workletter supplement the Lease and shall be construed to be a part of the Lease and are incorporated in the Lease. Without limiting the generality of the foregoing, any default by any party hereunder (after applicable notice and cure periods) shall have the same force and effect as a Default under the Lease. Should any inconsistency arise between this Workletter and the Lease as to the specific matters that are the subject of this Workletter, the terms and conditions of this Workletter shall control.

9. Representatives of Parties.

(a) Landlord has designated Geoffrey Sears as its sole representative with respect to the matters set forth in this Workletter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of Landlord as required in this Workletter. Landlord shall have the right to replace its representative at any time.

(b) Tenant has designated Kathryn Blystone as its sole representative with respect to the matters set forth in this Workletter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of Tenant as required in this Workletter.

10. Substantial Completion; Delay in Delivery.

(a) Landlord and Tenant acknowledge and agree that each shall use commercially reasonable efforts, as applied to their respective duties in the Lease and in this Workletter, to cause the Substantial Completion of the Landlord’s Workletter to occur as soon as possible following the Effective Date of the Lease.

(c) Notwithstanding anything to the contrary contained in this Workletter or the Lease, if Substantial Completion has not occurred by March 1, 2015 for any reason other than due solely to a Tenant Delay or up to ninety (90) days of Force Majeure Delay (as defined below), then for each day after March 1, 2015 until Substantial Completion has occurred, Tenant shall be entitled to one (1) day of abatement of Monthly Base Rent. if Substantial Completion has not occurred by April 1, 2015 for any reason other than due solely to a Tenant Delay or up to ninety (90) days of Force Majeure Delay, then for each day after April 1, 2015 until Substantial Completion has occurred, Tenant shall be entitled to two (2) days of abatement of Monthly Base Rent. If substantial completion of the Landlord’s Work has not occurred by May 1, 2015, then Tenant shall have the right, but not the obligation, to terminate the Lease with respect to the Premises and the Temporary Spaces by written notice to Landlord given on or before May 5, 2015, in which case neither party shall have any further rights or obligations hereunder and Landlord promptly shall refund to Tenant all sums paid by Tenant to Landlord in connection with Tenant’s execution of the Lease.


EXHIBIT D

TEMPORARY SPACES


LOGO


FIRST AMENDMENT TO LEASE by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD), and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation 1 Building

5858 Horton St.

Emeryville, California

That certain lease with an Effective Date of November 3, 2014 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord (the “Original Lease”) is hereby amended by the terms of this First Amendment to Lease (the “First Amendment”), the First Amendment having an effective date of June 9, 2015 (the “First Amendment Effective Date”). From and after the First Amendment Effective Date, the Original Lease and this First Amendment thereto shall collectively constitute and be referred to as the Lease for all purposes thereunder. All terms referred to below shall have the meanings attributed to them in the Original Lease.

In order to meet Tenant’s need for additional office space, Landlord hereby agrees to expand Tenant’s Premises, on a temporary basis, by addition thereto of that 2,581 rentable square foot office suite in the Building commonly referred to as Suite 263, as such is more specifically defined in Exhibit A attached hereto (the “Temporary Space”). Distinct from the Lease Term relating to the rest of the Premises, Tenant’s lease of the Temporary Space shall be on a month-to-month basis, with both Landlord and Tenant each having the right to provide a minimum thirty (30) days’ written notice to the other of their intent to terminate the Lease as it relates to the Temporary Space only. Tenant agrees to accept delivery of possession of the Temporary Space from Landlord in it’s as-is condition, with no obligation on behalf of Landlord to improve the Temporary Space in any way.

Effective upon the First Amendment Effective Date, Tenant’s Monthly Base Rent shall be increased by a fixed amount of $9,678.75 (the “Temporary Space Base Monthly Rent”), which amount shall be pro-rated for any partial calendar month. Tenant agrees to vacate the Temporary Space and return possession thereof to Landlord, in broom clean condition, immediately upon the end of the Lease Term as it relates to the Temporary Space. Failure to do so shall constitute a Default under the Lease. Other than those terms specifically outlined above, all of the other terms and conditions of the Lease shall apply to Tenant’s lease of the Temporary Space. Upon the termination of the Lease Term as it relates to the Temporary Space, the terms of the Original Lease shall remain applicable in full.

In addition to the Temporary Space, Landlord is willing to make the area denoted on Exhibit B hereto (the “Ping Pong Space”) available to Tenant for its exclusive use for the playing of ping pong at no additional cost on a month-to-month basis commencing with the First Amendment Effective Date. Tenant will accept the Ping Pong Space in·its existing, as-is condition, and the Ping Pong Space will be subject to all the terms and conditions of the Lease other than the obligation for Tenant to pay Monthly Base Rent therefor. Tenant understands its temporary use of the Ping Pong Space is an accommodation being made to Tenant by Landlord and that Landlord may terminate Tenant’s right to use the Ping Pong Space at any time with at least two (2) weeks’ advance written notice. Tenant agrees to vacate the Temporary Space and


return possession thereof to Landlord, in broom clean condition, upon such notice from Landlord. Failure to do so shall constitute a Default under the Lease.

IN WITNESS WHEREOF, the patties have executed this First Amendment as of the Effective Date.

 

TENANT:     LANDLORD:
Berkeley Lights, Inc.,     Emery Station Joint Venture LLC
a Delaware corporation     a California limited liability company
By:  

/s/ Stuart Merkadeau

    By:  

/s/ Richard Robbins

Print Name:   Stuart L. Merkadeau     Print Name:   Richard K. Robbins


EXHIBIT A

THE TEMPORARY SPACE


LOGO


EXHIBIT B

THE PING PONG SPACE


LOGO


SECOND AMENDMENT TO LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation·1 Building

5858 Horton St.

Emeryville, California

That certain lease dated November 3, 2015 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord (the “Original Lease”), was modified by the First Amendment to Lease dated June 9, 2015 (the “First Amendment”). The Original Lease, as modified by the First Amendment, is referred to herein as the “Existing Lease”. The Existing Lease is hereby further modified by the terms of this Second Amendment to Lease (the “Second Amendment”) dated September 25, 2015 (the “Second Amendment Effective Date”). Effective upon the Second Amendment Effective Date, the Existing Lease and Second Amendment thereto shall collectively constitute and be referred to as the Lease for all purposes thereunder.

Tenant presently occupies an 18,276 rentable square foot Premises on the 3rd floor of the Building (the “Existing Premises”), along with two separate temporary spaces on the Building’s 2nd floor, consisting of the 2,581 rentable square foot office Suite 263 Temporary Space as well as the Ping Pong Space, as each is more fully defined in the First Amendment. Tenant wishes, and Landlord has agreed, to expand the Premises to include that 13,497 rentable square foot space on the 3rd floor identified in Exhibit A attached hereto (the “Lab Expansion Space”), to extend the Expiration Date of the Lease, and to make other changes to the terms and conditions of the Lease. Landlord and Tenant have therefore entered into this Second Amendment, whose specific terms and conditions are contained herein. All terms referred to in this Second Amendment shall have the meanings attributed to them in the Original Lease and First Amendment thereto:

 

I.

EXTENSION OF LEASE TERM

The Term of the Lease as it applies to the Existing Premises and to the Lab Expansion Space is hereby extended such that it shall now expire December 31, 2023. The Term of the Lease as it applies solely to the Temporary Space (also referred to herein as the “Suite 263 Temporary Space”) is hereby extended such that it shall expire on December 31, 2016, subject to certain rights by Tenant to cancel said Term on the Suite 263 Temporary Space early, as more fully detailed in Section VI below. Tenant’s lease of the Ping Pong Space (and any Additional Temporary Space, as such is defined in Section VI hereof) shall be leased on a month-to-month basis, subject to Landlord’s right to terminate Tenant’s Lease of any such spaces upon two weeks’ notice.

 

B-1


II.

ADDITION OF LAB EXPANSION SPACE

 

  a.

Within ten (10) business days of the Second Amendment Effective Date, Landlord shall deliver possession of the Lab Expansion Space to Tenant in that space’s existing as-is condition.

 

  b.

Effective upon the date of Landlord’s delivery of possession of the Lab Expansion Space to Tenant, the Lab Expansion Space shall formally become a portion of Tenant’s Premises, subject to all the terms and conditions of the Lease other than the obligation to pay Rent.

 

  c.

In addition to the Rent called for in the Existing Lease, effective January 1, 2016, Tenant shall also be obligated to pay Monthly Triple-Net Rent for the Lab Expansion Space calculated using the Monthly Triple-Net Lab Expansion Space Rental Rate outlined below and applying said rate to the Lab Expansion Space rentable square footage:

 

PERIOD    MONTHLY TRIPLE-NET LAB EXPANSION SPACE RENTAL RATE
1/1/16-12/31/16    $3.25 per rentable square foot per month

Commencing January 1, 2017 and annually thereafter, the Monthly Triple-Net Lab Expansion Space Rental Rate shall be increased by three percent (3%).

 

  d.

Effective January 1, 2016, in addition to the amounts of Rent Adjustments and Rent Adjustment Deposits already called for pursuant to the Existing Lease, Tenant shall be obligated to pay 100% of Tenant’s Share of Operating Expenses and Taxes applicable to the Lab Expansion Space in the form of Rent Adjustments and Rent Adjustment Deposits. Tenant’s Share as it applies to Operating Expenses and Taxes for the Lab Expansion Space shall not be subject to a Base Year, as is the 18,276 rentable square foot Existing Premises through March 30, 2020.

 

  e.

In consideration for the above-referenced expansion of Tenant’s Premises, Section 2.6 of the ESE Lease (as referenced and defined in the Original Lease), as such was modified by Section 3 of the Original Lease, is deleted in its entirety.

 

III.

USE

Tenant’s use of the Existing Premises and of the Lab Expansion Space shall be as stated in the ESE Lease, and additionally include: “; the design, development, manufacture and service of opto-fluidic biosystems, including, instruments, tools, software and consumables; operation of a biology foundry for operating and running opto-fluidic biosystems, including a CLIA facility”. Tenant’s use of the Suite 263 Temporary Space and for any Additional Temporary Space shall be as general office space and Tenant’s use of the Ping Pong Space shall be for ancillary recreational use related to Tenant’s primary operations, such as for ping pong, etc.

 

B-2


IV.

TENANT IMPROVEMENTS

 

  a.

Tenant shall make improvements to the expanded Premises pursuant to the terms of the Workletter attached hereto as Exhibit B. Landlord shall make a $674,850.00 Tenant Improvement Allowance available to Tenant that Tenant may use to apply to the cost of Tenant’s improvements to the Premises, as more fully detailed in the Workletter.

 

  b.

Landlord shall be responsible, at its sole cost and expense, to ensure that Air Handler #2 and the other existing primary HVAC infrastructure serving the Lab Expansion Space is in industry-standard operational condition and has a commercially reasonable remaining useful life on Tenant’s commencing of business in the Lab Expansion Space.

 

  c.

In the event Tenant agrees, in its sole and absolute discretion, to make a mutually satisfactory portion of the Premises available for the creation of additional common area restroom facilities, Landlord agrees that it shall, at its sole cost and expense, pay for the design and construction of such additional common area restroom facilities. Landlord and Tenant agree to work cooperatively on the creation of such restroom facilities in the event Tenant so elects to make such space available for that purpose. Landlord’s obligation to create such facilities shall cease and no longer be valid if Tenant has not made the election prior to June 30, 2016.

 

V.

RENT AND EXPENSES APPLICABLE TO THE EXISTING PREMISES

 

  a.

Through March 31, 2020, Tenant shall pay Monthly Base Rent along with Tenant’s Share of Operating Expenses and Taxes applicable to the Existing Premises pursuant to the terms of the Existing Lease.

 

  b.

Effective April 1, 2020 and thereafter, Monthly Base Rent applicable to the 18,276 rentable square foot Existing Premises shall be calculated at the then applicable Triple-Net Lab Expansion Space Rental Rates outlined in Section II(c) hereof.

 

  c.

Effective April 1, 2020, Tenant’s Share of Operating Expenses and Taxes applicable to the Existing Premises (taking the form of Rent Adjustments and Rent Adjustment Deposits) shall no longer be calculated with a Base Year, but rather shall be calculated as fully triple-net where Tenant pays 100% of its pro-rata share of all Operating Expenses and Taxes applicable to the Existing Premises.

 

VI.

TEMPORARY SPACES

 

  a.

Effective upon the Second Amendment Effective Date, the Monthly Base Rent applicable to the Suite 263 Temporary Office Space shall be reduced from $9,678.75 to become $8,594.73. The aforementioned Monthly Base Rent shall be “fully-serviced”, meaning Tenant shall not be obligated to pay any share of Operating Expenses nor of Taxes related to the Suite 263 Temporary Space through December 31, 2016. As noted in Section I above, Tenant’s Lease as it applies solely to the Suite 263 Temporary Space shall expire December 31, 2016, subject to Tenant’s existing right, in its sole and absolute discretion, to terminate early the Lease as it relates to the Suite 263 Temporary Space only, upon no less than thirty (30) days advance written notice thereof by Tenant to Landlord.

 

B-3


  b.

In the event Tenant has reasonable need to house additional employees that it cannot otherwise accommodate in its Premises, and in the event Landlord can make space available, in its reasonable discretion, on the 2nd floor of the Building’s southern end (notionally indicated on Exhibit C hereto) to house such extra employees of Tenant, Tenant shall have the right to request to lease additional space from Landlord. Any areas of the 2nd floor so utilized to house additional Tenant employees will be referred to as “Additional Temporary Space”, and such areas will be identified from time-to-time on a floorplan provided by Landlord to Tenant. Tenant agrees to use reasonable efforts to utilize the smallest space to accommodate its employees, but such space may include one or more conference rooms/offices if the same are reasonably available adjacent to or within the identified Exhibit C space. Tenant shall pay Landlord Rent in respect of any Additional Temporary Space equal to $400.00 per month per employee so housed in the Additional Temporary Space. In the event Landlord reasonably requires recapture of the Additional Temporary Space in order to meet other third-party tenant space needs, Landlord shall have the right, with four weeks advance written notice to Tenant, to terminate Tenant’s right to lease any Additional Temporary Space.

 

  c.

Landlord and Tenant hereby reconfirm the terms of the Lease as they relate to the Ping Pong Space, including Landlord’s right to terminate Tenant’s lease of the Ping Pong Space at any time with two (2) weeks notice.

 

VII.

RENEWAL OPTION:

Tenant’s five-year Renewal Option, as such is defined in Section 2.7 of the ESE Lease and referenced in Section 4 of the Original Lease, shall apply to the entirety of the Premises (i.e. the combined Existing Premises and Lab Expansion Space, and also Suite 350, if Tenant has elected its Suite 350 Expansion Option more fully defined in Section X hereof and has not terminated its lease of Suite 350 per the terms of Section X(b) hereof), but shall not apply to the Suite 263 Temporary Space nor to any Additional Temporary Space nor to the Ping Pong Space, said spaces having no Tenant Renewal Option.

 

VIII.

SECURITY DEPOSIT

Prior to the making of this Second Amendment, the Security Deposit called for in the Lease was $75,297.12. Effective on the Second Amendment Effective Date, the Security Deposit as specified in the First Amendment shall be increased by $97,516.14 to become a new total of $172,813.26. Tenant shall have up to five (5) business days following the Second Amendment Effective Date to remit the additional $97,516.14 Security Deposit amount to Landlord.

Following the Second Amendment Effective Date, Tenant shall have the right to substitute a Letter of Credit, as such term is hereafter defined, for the cash Security Deposit. In the

 

B-4


event Tenant notifies Landlord of Tenant’s intent to so substitute a Letter of Credit, Landlord will reasonably cooperate with Tenant to do so. For purposes of this section, “Letter of Credit” shall mean an unconditional, irrevocable sight draft letter of credit, draw-able in the San Francisco Bay Area, issued by a national bank reasonably satisfactory to Landlord, naming Landlord as the beneficiary and otherwise in form and substance reasonably satisfactory to Landlord. The Letter of Credit shall be for at least a one (1) year term and shall provide: (i) that Landlord may make partial and multiple draws thereunder; (ii) that if Tenant fails to pay any Rent due under the Lease after applicable notice and cure periods, if any, with respect to any provision of the Lease, Landlord may at its sole option draw upon the Letter of Credit in an amount sufficient to cure such failure by Tenant, and the bank will honor a sight draft of Landlord accompanied by only a statement of Landlord that it has the right to draw upon the Letter of Credit pursuant to the terms of the Lease or that Tenant has filed a petition of bankruptcy, (iii) that notwithstanding such statement, the bank shall honor such draw without inquiry and the bank shall not have the authority, ability, right or discretion to inquire as to the basis for such statement, (iv) that in the event of Landlord’s assignment or other transfer of its interest in the Lease, the Letter of Credit shall be freely transferable by Landlord, one or more times, without charge and without recourse to the Landlord or the assignee or transferee of such interest; (v) that the Letter of Credit is governed by the Uniform Customs and Practice for Documentary Credits (2007 revisions), International Chamber of Commerce Publication No. 600; (vi) that the Letter of Credit will be automatically renewed upon the expiration of its initial term for additional one (1) year periods, not to extend beyond sixty (60) days after the Expiration Date of the Lease: and (vii) if the bank does not confirm the extension of the Letter of Credit at least thirty (30) days prior to the relevant expiration date or if the Tenant does not substitute a replacement Letter of Credit by such date, or if a monetary Default occurs under the Lease, Landlord shall be entitled to draw on the Letter of Credit and to hold and apply such funds as an additional Security Deposit in accordance with the terms of this Lease.

 

IX.

PARKING

Effective upon the Second Amendment Effective Date, Tenant’s existing rights to utilize fifty (50) parking spaces shall be increased by an additional thirty-five (35) spaces (with five (5) of such spaces to be so-called “premium” spaces located in the EmeryStation l Building) to become a new total of eighty-five (85) spaces. Upon the December 31, 2016 maturity of the Lease as it applies to the Suite 263 Temporary Space or upon Tenant’s earlier termination thereof pursuant to its right outlined in Section V(a) hereof, Tenant’s parking shall remain at a total of eighty-five (85) spaces notwithstanding the removal of the Suite 263 Temporary Space from Tenant’s total Premises. Tenant shall continue to pay Landlord’s quoted rates for parking and shall be subject to all rules and regulations relating thereto.

 

X.

EXPANSION

 

  a.

Suite 350: Tenant is granted a one-time right to expand its Premises by addition thereto of the existing 4,515 rentable square foot office Suite 350 (“Suite 350”, as more clearly delineated on Exhibit D hereto). As part of this right, Tenant shall have the right to expand Suite 350 by the addition thereto of the small common

 

B-5


  seating area (the “Seating Area”), as such is more clearly delineated on Exhibit D. In the event Tenant elects to include the Seating Area into Suite 350, the rentable square footage of the enlarged Suite 350 shall be 4,684. Tenant’s option to lease Suite 350 (including possibly the Seating Area) is referred to herein as the “Suite 350 Expansion Option”.

Tenant may invoke the Suite 350 Expansion Option (including the decision whether or not to include therein the Seating Area) by written notice to Landlord made on or before June 30, 2016. In the event Tenant so notifies Landlord of Tenant’s election of the Suite 350 Expansion Option, Landlord shall deliver possession of Suite 350 (and also of the Seating Area, if applicable) to Tenant, in their then respective as-is conditions, within thirty (30) days of Landlord recapturing possession of Suite 350 from the prior third-party tenant. The date of Landlord’s delivery of possession of Suite 350 to Tenant shall be referred to as the “Suite 350 Commencement Date”.

Effective upon the Suite 350 Commencement Date, Suite 350 (and the Seating Area, if applicable) shall be added to Tenant’s Premises and shall be subject to all the terms and conditions of the Lease. To reflect the addition to Tenant’s Premises of Suite 350, the Monthly Base Rent Tenant is otherwise obligated to pay for the Premises pursuant to the terms of the Lease shall be increased by monthly base rent applicable to Suite 350 (the “Suite 350 Monthly Base Rent”). The Suite 350 Monthly Base Rent shall be equal to the Suite 350 rentable square footage (which may include the rentable square footage of the Seating Area, as discussed above), multiplied by the Suite 350 Monthly Base Rental Rate applicable from time to time, as outlined below:

 

PERIOD   

SUITE 350 MONTHLY BASE RENTAL RATE

Present—12/31/16

  

$3.33 per rentable square foot per month

Commencing January 1, 2017 and annually thereafter, the Suite 350 Monthly Base Rental Rate shall be increased by three percent (3%). Notwithstanding any of the above, Suite 350 shall be free of Monthly Base Rental for the first sixty (60) days following the Suite 350 Commencement Date.

The Suite 350 Monthly Base Rental Rate applicable to the period up to and including December 31, 2016 above is intended to represent a “fully-serviced” rate, meaning that as it relates solely to Suite 350, Tenant’s Rent Adjustments and Rent Adjustment Deposits (which are the vehicle for Tenant paying Tenant’s share of Operating Expenses and of Taxes relating to Suite 350) will be calculated using a Base Year of calendar 2016.

In the event Tenant adds Suite 350 to its Premises pursuant to the terms above, Landlord agrees to make a Tenant Improvement Allowance equal to $20.00 per rentable square foot times the rentable square footage of Suite 350 available to Tenant, which Tenant may apply to the costs of Tenant Improvements Tenant

 

B-6


makes to Suite 350 (the “Suite 350 Tenant Improvement Allowance”), such Suite 350 Tenant Improvement Allowance to be provided per the terms of the Workletter.

In the event Tenant adds Suite 350 to its Premises pursuant to the above, Tenant’s parking shall be increased by thirteen (13) spaces, for which Tenant shall pay Landlord’s quoted rates. In the event Tenant terminates its lease of Suite 350 pursuant to the terms of Section X(b) hereof, Tenant’s parking would then be decreased by said thirteen spaces.

 

  b.

EmeryStation West: Landlord’s affiliate EmeryStation West, LLC (“ESW”) controls a site northwest of the Building, upon which site ESW is contemplating the development of a new commercial building referred to as “EmeryStation West”. Landlord hereby agrees to arrange for Tenant to have a one-time right of negotiation (“RON”) with ESW regarding the possibility of Tenant leasing space in EmeryStation West. The business terms of Tenant’s RON will be as follows:

* The Term of the RON will commence upon the Second Amendment Effective Date and shall end, being of no further force and effect, upon the earlier to occur of: a) the expiry or earlier termination of this Lease, b) the end of the RON period, as defined below, and c) the date ESW conveys or transfers the EmeryStation West property to any entity that is not an Affiliate (as defined in the Lease).

* Tenant’s RON shall be subject and subordinate to any existing or future loan(s) seemed by a mortgage or deed of trust encumbering the EmeryStation West property, and shall automatically terminate without notice upon the earlier of: a) a conveyance of a deed in lieu of foreclosure or b) upon a judicial or non-judicial foreclosure of the property. Tenant covenants and agrees to promptly execute any subordination agreement required by an existing or prospective lender confirming that this RON is subject and subordinate to a loan.

* The RON shall be null and void at any time Tenant is in Default under the Lease and does not timely cure the same.

* Tenant acknowledges and agrees to all of the following: a) ESW has no obligation to construct EmeryStation West or any other improvements on the property, b) the decision to build any improvements on the subject site, and the decision as to design, size, type and mix of improvements to be built and uses to be housed therein, if any (i.e. commercial, office, lab, research and development, residential, retail, or a mix of different uses), and the decision as to the timing of the building of such improvements, if any, shall be determined by ESW in its sole and absolute discretion.

* Tenant’s RON shall only be valid in the event ESW is willing, in its sole and absolute discretion, to lease for General Office Use purposes as little as 60,000 rentable square feet of space on the uppermost occupiable floors of EmeryStation West. Tenant agrees and acknowledges that ESW may elect not to lease space for General Office Use and/or may elect to seek other third-party tenants to take greater amounts of space than 60,000 rentable square feet.

 

B-7


* In the event: a) ESW has elected to construct EmeryStation West, and b) ESW is willing to lease at least 60,000 rentable square feet of space on the project’s uppermost floors for General Office purposes, and c) Tenant’s RON is in full force and effect, then ESW and Tenant agree to negotiate in good faith for a period of thirty (30) days regarding Tenant’s potential lease of space in EmeryStation West (said thirty-day period being referred to as the “RON Period”), it being agreed and acknowledged by both ESW and Tenant that the terms of any such lease would be subject to the mutual satisfaction of each party in its sole and absolute discretion.

* In the event that ESW and Tenant have not entered into a mutually-satisfactory lease for space in EmeryStation West by the end of the RON Period, Tenant’s RON shall be null and void and of no further force and effect. In the event the RON period has so expired without a new lease being entered into, Tenant shall have the right, within no more than fifteen (15) days after the expiration of the RON Period, to notify Landlord in writing (“Tenant’s Suite 350 Termination Notice”) of Tenant’s intent to cancel early the Lease as it applies to Suite 350 only (in the event Tenant has leased Suite 350 pursuant to Section X(a) above), such termination to take place ninety (90) days after the date Landlord receives Tenant’s Suite 350 Termination Notice. Tenant’s early cancellation of its Lease of Suite 350 will be at no cost to Tenant and will have no effect on the Lease as it relates to the balance of Tenant’s Premises.

* Landlord and Tenant herby re-confirm the terms regarding Tenant’s right to sublet as such are stated in Section 11 of the Lease and in Section 10 of the ESE Lease, such that, in the event that ESW and Tenant are unable to agree upon the terms of a lease in EmeryStation West, or in the event the RON expires, Tenant shall have the right, in its discretion, to sublease all or a part of the Existing Premises and Lab Expansion Space, and also Suite 350, if Tenant has elected its Suite 350 Expansion Option, all pursuant to the more detailed terms and conditions of the earlier-referenced sections.

 

XI.

BROKERAGE

Tenant represents and warrants to Landlord that it has been represented in this transaction by CRESA, to whom Landlord will pay a brokerage commission pursuant to a separate agreement, and that no brokerage commission or other such fee shall be due and payable by Landlord to any other representative of Tenant as a result hereof.

 

XII.

OTHER

Other than the terms of this Second Amendment outlined above, all other terms and conditions of the Original Lease and First Amendment thereto remain in full force and effect.

 

B-8


IN WITNESS WHEREOF, the parties have executed this Second Amendment.

 

TENANT:

 

LANDLORD:

Berkeley Lights, Inc.,

a Delaware corporation

 

Emery Station Joint Venture LLC

a California limited liability company

By:

 

/s/ Stuart Merkadeau

 

By:

 

/s/ Richard K. Robbins

Print Name: Stuart Merkadeau   Print Name: Richard K. Robbins

 

B-9


EXHIBIT A

LAB EXPANSION SPACE

 

B-10


LOGO

 

B-11


EXHIBIT B

WORKLETTER AGREEMENT

(TENANT BUILD)

1. Defined Terms. Capitalized terms used in this Workletter shall have the same meanings set forth in the Lease except as otherwise specified herein and except for terms capitalized in the ordinary course of punctuation. For purposes of this Workletter the following capitalized terms have the following meanings:

1.1 “Design Documents” means the layout plans and specifications for the real property improvements to be constructed by Tenant in the Premises which are the final product of the preliminary space planning and which include, among other things, all partitions, doors, HVAC (heating, ventilating and air conditioning systems) distribution, ceiling systems, light fixtures, plumbing installations, electrical installations and outlets, telephone installations and outlets, any other installations required by Tenant, fire and life-safety systems, wall finishes and floor coverings, whether to be newly installed or requiring changes from the as-is condition of the Premises as of the date of execution of the Lease, all in sufficient detail for Landlord’s review;

1.2 “Construction Documents” means, collectively, (a) a copy of the proposed construction contract for the Tenant Improvements, (b) a written assignment of the construction contract, creating a prior perfected security interest in all of Tenant’s rights thereunder in favor of Landlord and containing the written consent of Tenant’s general contractor to the assignment, (c) a copy of the architect’s contract for the Tenant Improvements, (d) a written assignment of the architect’s contract, creating a prior perfected security interest in all of Tenant’s rights thereunder in favor of Landlord and containing the written consent of Tenant’s architect to the assignment, and (e) a list of all subcontractors and materials suppliers proposed to be used by Tenant in connection with the construction of the Tenant Improvements;

1.3 “Construction Drawings” means the final architectural plans and specifications, and engineering plans and specifications, for the real property improvements to be constructed by Tenant in the Premises in sufficient detail to be submitted for governmental approvals and building permits and to serve as the detailed construction drawings and specifications for the contractor, and shall include, among other things, all partitions, doors, HVAC (heating, ventilating and air conditioning systems) distribution, ceiling systems, light fixtures, plumbing installations, electrical installations and outlets, telephone installations and outlets, any other installations required by Tenant, fire and life-safety systems, wall finishes and floor coverings, whether to be newly installed or requiring changes from the as-is condition of the Premises as of the date of execution of the Lease;

1.4 “Schedule of Values” means the allocation of costs to the various portions of the work involved in the construction and installation of the Tenant Improvements and setting forth Tenant’s reasonable, good faith estimate of the timing of Landlord’s disbursements of the Tenant Improvement Allowance and the amount of each such disbursement;

 

B-12


1.5 “Tenant Improvements” means all real property improvements to be constructed by Tenant as shown on the Construction Drawings, as they may be modified as provided herein;

1.6 “Tenant Improvement Allowance” means the amounts to be paid by Landlord set forth in Section IV(a) of the Second Amendment on account of all construction costs, space planning and design fees, architecture and engineering fees, permit fees and construction management fees incurred by Tenant in designing and constructing the Tenant Improvements. Tenant shall not be entitled to any cash payment, credit, offset or other benefit based on any excess of the Tenant Improvement Allowance over the actual costs of the construction and installation of the Tenant Improvements.

2. Development of Plans

2.1 Approval of Architect and Contractor. Tenant’s architect, contractor, major suppliers and major subcontractors shall each be subject to the reasonable approval of Landlord. Landlord may request information about these entities, including financial statements and a summary of representative projects. If Landlord does not approve the architect, contractor, any major subcontractor or major supplier, the parties shall negotiate in good faith to select another architect, contractor, subcontractor or materials supplier mutually acceptable to the parties. Landlord shall be entitled to withhold its approval of any entity or person, who, in Landlord’s determination, is financially or otherwise professionally unqualified to design or construct the Tenant Improvements. In addition, in the event Landlord determines that a performance bond and labor and materials payment bond is necessary to ensure lien-free completion of the Tenant Improvements, Landlord may condition its approval of a contractor upon Tenant’s obtaining such bonds, each in an amount equal to one hundred percent (100 %) of the estimated cost of the Tenant Improvements and in a form reasonably acceptable to Landlord. Notwithstanding the foregoing, Landlord’s approval of any architect, contractor, subcontractor or materials supplier shall not constitute Landlord’s representation or warranty that any such architect, contractor, subcontractor or supplier is in fact qualified to perform the Tenant Improvements.

2.2 Design Documents. Prior to Tenant’s commencement of the construction of the Tenant Improvements, Tenant shall prepare the Design Documents and deliver them to Landlord. Within ten (10) business days following delivery of the Design Documents, Landlord shall approve the Design Documents or deliver to Tenant written notice of their disapproval which shall specify the changes that must be made to the Design Documents as a condition of Landlord’s approval. Within ten (10) business days following receipt of Landlord’s notice of disapproval, Tenant shall deliver a revised set of Design Documents to Landlord which shall incorporate the changes specified in Landlord’s notice of disapproval.

2.3 Construction Drawings. As soon as the Design Documents are approved by Landlord, Tenant shall prepare the Construction Drawings that are consistent with and logical evolutions of the Design Documents and the Schedule of Values. The Construction Drawings and Schedule of Values shall be delivered to Landlord for approval. If Landlord does not approve the Construction Drawings and/or the Schedule of Values, Landlord shall deliver to Tenant, as soon as reasonably possible but within ten (10) business days following receipt

 

B-13


thereof, written notice of such disapproval. The notice shall specify the changes that must be made to the Construction Drawings and/or the Schedule of Values as a condition for obtaining Landlord’s approval. Within ten (10) business days following receipt of Landlord’s notice of disapproval, Tenant shall deliver a revised set of Construction Drawings and/or Schedule of Values to Landlord, which incorporate the changes specified in Landlord’s notice of disapproval. Landlord and Tenant shall each sign a copy of the approved Construction Drawings and Schedule of Values.

2.4 Landlord’s Approval. If the Construction Drawings conform to the Design Documents and this Workletter, Landlord’s approval shall not be unreasonably withheld. If the Construction Drawings show work requiring a modification or change to the shell of the Building, Landlord shall not be deemed unreasonable if Landlord disapproves such Construction Drawings or if Landlord conditions its consent to such Construction Drawings upon Tenant’s paying to Landlord, prior to the commencement of construction, the full cost of modifying or changing the shell of the Building. Landlord may, at Landlord’s option, have the Design Documents or the Construction Drawings reviewed by Landlord’s architect, engineer and/or construction manager; provided, however, that any such review shall be performed within the time periods set forth above for Landlord’s review of the Design Documents and the Construction Drawings. Tenant shall reimburse the cost of any such review to Landlord within ten (10) days following demand therefor by Landlord. In no event shall the approval by Landlord (or Landlord’s architect, engineer or construction manager) of the Design Documents or the Construction Drawings constitute a representation or warranty by Landlord (or Landlord’s architect, engineer or construction manager) of: (i) their accuracy, sufficiency or completeness for their intended purpose; (ii) the absence of design defects or construction flaws; or (iii) their compliance with applicable laws. Tenant agrees that Landlord (and Landlord’s architect, engineer and construction manager) shall incur no liability by reason of its approval or disapproval of any item.

2.5 Compliance with Laws. Tenant covenants, agrees, represents and warrants that the Design Documents and Construction Drawings (i) shall be in a form satisfactory for filing with appropriate governmental authorities and (ii) shall conform to all applicable codes, rules, regulations and ordinances of all governing authorities, including all building codes and the ADA.

2.6 Changes. No changes shall be made to the Design Documents or the Construction Drawings without the prior written consent of Landlord. All change orders requested by Tenant shall be made in writing and shall specify any added or reduced cost resulting therefrom. Any change proposed by Tenant shall be approved or disapproved by Landlord within five (5) business days following Landlord’s receipt of detailed information pertaining to the proposed change. Landlord’s failure to approve any proposed change within five (5) business days shall be deemed Landlord’s disapproval thereof.

3. Construction of Tenant Improvements

3.1 Permits and Approvals. Tenant shall submit the Construction Drawings to all appropriate governmental agencies for approval and shall not commence construction or installation of the Tenant Improvements unless and until Tenant has obtained all necessary permits and approvals and has delivered copies of these documents to Landlord.

 

B-14


3.2 Construction Documents. Prior to the commencement of construction and installation of the Tenant Improvements, Tenant shall submit to Landlord, for Landlord’s approval, the Construction Documents. Within five (5) business days following the delivery of all of the Construction Documents, Landlord shall approve such information or deliver to Tenant written notice of disapproval of all or any information contained therein. If Landlord does not approve the proposed construction contract, proposed form of subcontractor agreement or the proposed architect’s contract for the Tenant Improvements, Landlord’s notice shall specify the changes that must be made to these agreements as a condition of Landlord’s approval. Within five (5) business days following receipt of Landlord’s notice of disapproval, Tenant shall deliver to Landlord revised copies of the proposed architect’s and/or contractor’s agreements and/or subcontractor’s agreements which incorporate the specified changes. Following approval of the Construction Documents by Landlord, Tenant shall not materially amend, materially modify or terminate any of the Construction Documents without Landlord’s prior written approval.

3.3 Commencement and Completion of Construction. Following Tenant’s satisfaction of all of the requirements of Section 2 above and this Section 3, Tenant shall commence construction and installation of the Tenant Improvements in accordance with the Construction Drawings and shall pursue the same diligently to completion. Tenant covenants to give Landlord at least ten (10) days’ prior written notice of its commencement of construction or delivery of materials to the Premises to enable Landlord to post a notice of nonresponsibility respecting the Tenant Improvements.

3.4 Building Systems. In no event shall Tenant interfere with the provision of heating, plumbing, electrical or mechanical system services to the Building, make any structural changes to the Building, make any changes to the heating, plumbing, electrical or mechanical systems of the Building, or make any changes to the Premises which would weaken or impair the structural integrity of the Building, alter the aesthetic appearance of the Building exterior, or which would affect any warranties applicable to the Building or any improvements constructed or installed by Landlord therein, without Landlord’s prior written consent, which consent may be withheld in Landlord’s reasonable discretion. If Tenant performs works that pertains to the structure of the building or the building’s systems, Landlord may require Tenant to engage Landlord’s structural engineer to design, supervise and monitor any construction work affecting either the Building systems or the structure of the Building.

3.5 Inspections. Landlord and its officers, agents or employees shall have the right at all reasonable times to enter upon the Premises and inspect the Tenant Improvements and to determine that the same are in conformity with the Construction Drawings and all of the requirements of this Workletter. Tenant acknowledges, however, that Landlord is under no obligation to supervise, inspect or inform Tenant of the progress of construction and Tenant agrees that it shall not rely upon Landlord to perform any of these activities. Neither the inspection rights granted to Landlord in this Workletter, nor the making of such inspections by Landlord, shall operate as a waiver of any rights of Landlord to require that the construction and installation of the Tenant Improvements conform with this Workletter, the Construction Drawings and all requirements of applicable law.

 

B-15


3.6 Walk-Through of Tenant Improvements. Within two (2) business days following the completion of the Tenant Improvements, Tenant shall notify Landlord and shall provide Landlord an opportunity to inspect the Tenant Improvements. Within ten (10) business days following Tenant’s notice, Landlord (or its representative) shall walk-through and inspect Tenant’s work on the Tenant Improvements and shall either approve Tenant’s work or advise Tenant in writing of any defects or uncompleted items. Tenant shall promptly repair such defects or uncompleted items to Landlord’s reasonable satisfaction. Landlord’s approval of the Tenant Improvements, or Landlord’s failure to advise Tenant of any defects or uncompleted items in the Tenant Improvements, shall not relieve Tenant of responsibility for constructing and installing the Tenant Improvements in accordance with the Construction Drawings, this Workletter and all applicable laws.

3.7 Final Documents. Following completion of the Tenant Improvements, Tenant shall (a) obtain and deliver to Landlord a copy of the certificate of occupancy for the Tenant Improvements from the governmental agency having jurisdiction thereof; (b) promptly cause a notice of completion to be validly recorded for the Tenant Improvements; (c) furnish Landlord with unconditional waivers of lien in statutory form from all parties performing labor and/or supplying equipment and/or materials in connection with the Tenant Improvements, including Tenant’s architect(s); (d) deliver to Landlord a certificate of Tenant’s architect(s) certifying completion of the Tenant Improvements in substantial accordance with the Construction Drawings; (e) deliver to Landlord a certificate of Tenant’s contractor(s) certifying completion of the Tenant Improvements in substantial accordance with the Construction Drawings; (f) deliver to Landlord a full set of reproducible as-built drawings (signed and dated by the contractor and each responsible subcontractor) for the Tenant Improvements; and (g) Tenant shall deliver to Landlord copies of all written construction and equipment warranties and manuals related to the Tenant Improvements.

4. Payment of Costs of Tenant Improvements.

4.1 Tenant’s Cost. Any cost incurred in the design or construction of the Tenant Improvements in excess of the Tenant Improvement Allowance shall be borne by Tenant in accordance with the terms and conditions set forth below, including without limitation by Tenant’s use of the Additional Tenant Improvement Allowance. The costs of the Tenant Improvements shall include the following items:

(a) The costs of the architect, contractor, suppliers and subcontractors and any other consultants retained by Tenant in connection with the preparation of Design Documents and Constructions Drawings, including, engineering costs associated with completion of the State of California energy utilization calculations under Title 24 legislation;

(b) All costs of obtaining from the City of Emeryville and any other governmental authority, approvals, building permits and occupancy permits, if any;

(c) All costs of interior design and finish schedule plans and specifications including as-built drawings;

 

B-16


(d) All direct and indirect costs of procuring, installing and constructing the Tenant Improvements, including: (i) the construction administration fee to Landlord in the amount of 2% of the costs of the Tenant Improvements, and (ii) the cost of any services or utilities made available by Landlord;

(e) All costs of designing, procuring, constructing and installing Tenant Improvements in compliance with all applicable laws, including with all building codes and the ADA; and,

(f) All fees payable to Landlord’s architectural or engineering firm if they are required to review, monitor or design any portion of the Tenant Improvements.

4.2 Restrictions on Use of Tenant Improvement Allowance; Landlord Owned FF&E. In no event shall the Tenant Improvement Allowance be used to pay any costs of procuring or installing in the Premises any trade fixtures, equipment, furniture, furnishings, telephone equipment, cabling for any of the foregoing, or other personal property to be used in the Premises by Tenant, which cost shall be paid by Tenant.

4.3 Procedure for Disbursement of the Tenant Improvement Allowance. Upon Substantial Completion of the Tenant Improvements and payment of full by Tenant of all such Tenant Improvements, Tenant shall have the right to deliver to Landlord such invoices marked paid and other evidence as Landlord shall reasonably require of the cost of the design of the Tenant Improvements and the cost of the Tenant Improvements already constructed and Landlord shall pay within forty-five (45) days of such an amount up to the TI Allowance; provided, however, that no invoices or other evidence shall not be submitted by Tenant to Landlord until all of the following, have occurred: (i) Landlord has reasonably and timely determined that all of the Tenant Improvements have been Substantially Completed in accordance with the Construction Documents, based upon certifications satisfactory to Landlord delivered by Tenant and Tenant’s architect; (ii) Tenant shall have complied with the requirements set forth in Section 3.7 above; (iii) Tenant shall have submitted to Landlord a cost breakdown of Tenant’s final and total construction costs incurred in connection with the Tenant Improvements, together with receipted invoices showing evidence of full payment therefor; (iv) Tenant shall have completed Landlord’s punchlist items; and (v) the Lease shall be in full force and effect.

5. Rent Commencement Date. Until the January 1, 2016 date specified in the Second Amendment, the entry into the Lab Expansion Space by Tenant to perform Tenant Improvements shall be without payment of Base Monthly Rent or Rent Adjustments applicable to the Lab Expansion Space, but such entry and all acts in connection with it are subject to and governed by all other provisions of the Lease, including without limitation, Tenant’s indemnification and insurance obligations.

6. General Requirements for Construction.

6.1 Tenant’s Obligation to Construct. Tenant shall construct and install the Tenant Improvements in a good and workmanlike manner in accordance with the Construction Drawings, this Workletter and all applicable laws. Tenant shall be solely responsible for the payment of all cost and expenses related to the construction and installation of the Tenant Improvements, subject to reimbursement by Landlord as provided for in this Workletter.

 

B-17


6.2 Tenant’s Access to the Premises. Tenant shall coordinate with the Building’s project manager for access to the Premises and the scheduling of construction work. Tenant shall exercise due diligence and best efforts to ensure that Tenant’s construction and installation of the Tenant Improvements does not unreasonably interfere with the use and enjoyment of other tenants of the Building or the Project. Landlord shall use commercially reasonable efforts to accommodate Tenant’s scheduling of deliveries and construction activities.

6.3 Coordination of Construction Activities. If any shutdown of plumbing, electrical or air conditioning equipment of the Building becomes necessary during the course of construction of the Tenant Improvements, Tenant shall notify Landlord and Landlord and Tenant shall agree upon when, and upon what conditions, such shutdown may be made in order to cause the least disruption to other tenants in the Building. Any damage to the Building or the Project caused by Tenant or its contractor or subcontractors in connection with the construction of the Tenant Improvements shall be immediately repaired at Tenant’s sole cost and expense.

6.4 Protection against Lien Claims. Tenant agrees to fully pay and discharge all claims for labor done and materials and services furnished in connection with the construction of the Tenant Improvements, to diligently file or procure the filing of a valid notice of completion within ten (10) days following completion of construction of the Tenant Improvements, to diligently file or procure the filing of a notice of cessation upon any cessation of labor on the Tenant Improvements for a continuous period of thirty (30) days or more, and to take all reasonable steps to forestall the assertion of claims of lien against the Premises, the Building or the Project. Upon the request of Landlord, Tenant shall provide Landlord with satisfactory evidence of the release or removal (including removal by appropriate surety bond) of all liens recorded against the Premises, the Project, or any portion thereof, and all stop notices received by Tenant.

6.5 Indemnification. Except to the extent attributable to the gross negligence and or willful misconduct of Landlord, Tenant shall, at Tenant’s sole cost and expense, defend, indemnify, save and hold Landlord harmless from and against any and all claims, liabilities, demands, losses, expenses, damages or causes of actions (whether legal or equitable in nature) asserted by any person, firm, corporation, governmental body or agency or entity arising out of the construction of the Tenant Improvements. Except to the extent attributable to the gross negligence and or willful misconduct of Landlord, Tenant shall pay to Landlord upon demand all claims, judgments, damages, losses or expenses (including attorneys’ fees) incurred by Landlord as a result of any legal action arising out of the construction of the Tenant Improvements. This indemnification shall be in addition to the insurance requirements set forth in the Lease and this Workletter and the obligations hereunder shall survive the expiration or termination of the Lease.

7. Insurance.

7.1 Tenant’s Required Insurance Coverage. At least five (5) days prior to the date Tenant commences construction of the Tenant Improvements, Tenant shall submit to Landlord evidence of (i) the insurance coverage required under Article 16 of the Lease; and (ii)

 

B-18


broad form “Builder’s Risk” property damage insurance with limits of not less than one hundred percent (100%) of the estimated value of the Tenant Improvements. All such policies shall provide that thirty (30) days’ written notice must be given to Landlord prior to termination or cancellation. The insurance policies shall name Landlord and Landlord’s property manager as additional insureds and shall provide that Landlord, although an additional insured, may recover for any loss suffered by Landlord or Landlord’s agents by reason of the negligence of Tenant or Tenant’s contractors, subcontractors and/or employees.

7.2 Other Insurance Coverage. At least five (5) business days prior to the date Tenant commences construction of the Tenant Improvements, Tenant shall deliver to Landlord certificates of insurance from the carrier(s) providing insurance to Tenant’s contractor and Tenant’s architect evidencing the following types of coverage in such amounts as are reasonably determined by Landlord to be necessary for the construction of the Tenant Improvements: (i) professional liability insurance; (ii) commercial general liability insurance; (iii) business automobile liability insurance; (iv) workers’ compensation insurance; and (v) umbrella liability insurance. The insurance specified in (i), (ii), (iii) and (v) above shall name Landlord and Landlord’s property manager as additional insureds, and all such policies shall provide that thirty (30) days’ written notice must be given to Landlord prior to termination or cancellation.

7.3 Waivers of Claims against Landlord. Tenant waives, and Tenant shall use best efforts to cause each of its architects, contractors, suppliers and subcontractors to waive, all rights to recover against Landlord and its agents, contractors and employees for any loss or damage arising from a cause covered by insurance required to be carried by Tenant hereunder and shall cause each respective insurer to waive all rights of subrogation against Landlord and its agents, contractors and employees in connection therewith to the same extent.

8. Default and Remedies.

8.1 Defaults. Each of the following events shall constitute an event of default (“Default”) under this Workletter:

(a) Failure by Tenant to commence and/or complete construction and installation of the Tenant Improvements in accordance with the terms and conditions set forth in this Workletter or the failure by Tenant to comply with any of the covenants, provisions or conditions of this Workletter;

(b) Deviations in construction from the Construction Drawings (as determined by Landlord or its representative) without the approval of Landlord, the appearance of defective workmanship or materials in the construction of the Tenant Improvements which are not corrected by Tenant within thirty (30) days after notice from Landlord (or if the defect is such that it cannot reasonably be corrected within said thirty (30) day period, the correction of such defect is not initiated by Tenant within said thirty (30) day period and thereafter prosecuted diligently to completion); and

(c) The default or breach by Tenant of any provision of the Lease.

8.2 Remedies. In the event of a Default by Tenant under this Workletter, Landlord shall thereafter have no further obligation to disburse any portion of the Tenant Improvement

 

B-19


Allowance unless and until such Default is cured. Any such Default shall be a default under the Lease and shall entitle Landlord to exercise all remedies set forth in the Lease. In addition, upon the occurrence of a Default, Landlord shall have the right (but not the obligation), at Tenant’s sole cost and expense, to enter upon the Premises and take over and complete construction and installation only as to those areas where the construction or installation of the Tenant Improvements has been commenced and such other areas to the extent necessary to relet the Premises, and to make disbursements from the Tenant Improvement Allowance toward completion of the Tenant Improvements. In connection with undertaking such work, Landlord may discharge or replace the contractors or subcontractors performing such work. Where substantial deviations from the Construction Drawings have occurred which have not been approved by Landlord, or defective or unworkmanlike labor or materials are being used in construction of the Tenant Improvements, Landlord shall have the right to demand that such labor or materials be corrected, and if the same are not so corrected, shall have the right to immediately order the stoppage of all construction until such condition is corrected, until the defective work is corrected to Landlord’s satisfaction.

9. Force and Effect. The terms and conditions of this Workletter supplement the Lease and shall be construed to be a part of the Lease and are incorporated in the Lease. Without limiting the generality of the foregoing, any default by any party hereunder shall have the same force and effect as a default under the Lease. Should any inconsistency arise between this Workletter and the Lease as to the specific matters that are the subject of this Workletter, the terms and conditions of this Workletter shall control.

 

B-20


EXHIBIT C

ADDITIONAL TEMPORARY SPACE

 

B-21


LOGO

 

B-22


EXHIBIT D

SUITE 350

 

B-23


LOGO


THIRD AMENDMENT TO LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation 1 Building

5858 Horton St.

Emeryville, California

That certain lease dated November 3, 2015 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord, as such was modified by that First Amendment to Lease dated June 9, 2015 (the “First Amendment”) and by that Second Amendment to Lease dated September 25, 2015 (the “Second Amendment”), collectively constitute the “Lease”. The Lease is hereby further amended by the terms of this Third Amendment to Lease (the “Third Amendment”), which shall have an effective date of January 11, 2016 (the “Third Amendment Effective Date”). Effective upon the Third Amendment Effective Date, the existing Lease and this Third Amendment thereto shall thereafter collectively constitute and be referred to as the Lease for all purposes thereunder.

Pursuant to Section X of the Second Amendment, Tenant was granted an Expansion Option relating to Suite 350 and to the Seating Area (the “Suite 350 Expansion Option”). Via written notice to Landlord, Tenant has formally invoked its Suite 350 Expansion Option such that both Suite 350 and the Seating Area (as they are more specifically delineated in Exhibit A hereto) shall be added to Tenant’s Premises. Tenant subsequently has requested that the Seating Area be added to Tenant’s Premises concurrent with the addition of the Lab Expansion Space described in the Second Amendment. Landlord and Tenant are therefore entering into this Third Amendment, whose specific terms and conditions are contained herein. All terms referred to in this Third Amendment shall have the meanings attributed to them in the Lease:

 

  I.

POSSESSION:

Landlord shall deliver possession of the Seating Area to Tenant, in its as-is condition, on or before January 1, 2016. Landlord shall deliver possession of Suite 350 to Tenant, in its as-is condition, no more than thirty (30) days following Landlord’s recapturing possession of Suite 350 from the prior third-party tenant thereof. Tenant understands and acknowledges that the Seating Area is not demised from the Building Common Areas and that such demising shall be a responsibility of Tenant as part of the Tenant’s Improvements Tenant is making to the Lab Expansion Space. The date of Landlord’s delivery of possession of Suite 350 to Tenant shall be referred to as the “Suite 350 Commencement Date”.

 

  II.

RENTABLE AREA:

Effective January 1, 2016, the Seating Area shall be added to and become part of Tenant’s Premises. The Seating Area is agreed to measure 169 rentable square feet (the “Seating Area Rentable Area”). Effective upon the Suite 350 Commencement Date, Suite 350 shall added to and become a part of Tenant’s Premises. Suite 350 is agreed to measure 4,515 rentable square feet. As a result,

 

B-1


Tenant’s Premises shall be increased by 4,515 rentable square feet (the “Suite 350 Rentable Area”).

 

  III.

MONTHLY BASE RENT:

Effective January 1, 2016, the Monthly Base Rent otherwise specified in and called for by the Lease shall be increased by the “Seating Area Monthly Base Rent”, which is defined to be the product of the Seating Area Rentable Area times the “Suite 350 Monthly Rental Rate” applicable from time to time, as such is defined herein. Effective upon the Suite 350 Commencement Date, the Monthly Base Rent otherwise called for shall be further increased by the “Suite 350 Monthly Base Rent”, which is defined to be the product of Suite 350 Rentable Area times the “Suite 350 Monthly Rent Rate” applicable from time to time, as such is defined herein.

The “Suite 350 Monthly Rent Rate” shall be equal to $3.33 per rentable square foot per month during calendar year 2016. On January 1, 2017 and annually thereafter, the Suite 350 Monthly Rental Rate shall increase by three percent (3%). Notwithstanding anything above to the contrary, the Seating Area Monthly Base Rent shall be zero dollars ($0.00) during the months of January and February 2016, and the Suite 350 Monthly Base Rent shall be zero dollars ($0.00) during the first sixty (60) days following the Suite 350 Delivery Date.

 

  IV.

EXPENSES:

Operating Expenses and Taxes applicable to the Premises other than the Seating Area Rentable Area portion thereof and to the Suite 350 Rentable Area portion thereof shall continue to be determined pursuant to the terms of the Existing Lease. It is Landlord and Tenant’s intent that the Monthly Base Rent for both the Seating Area Rentable Area and to the Suite 350 Rentable Area represents a “fully-serviced” rent subject to a 2016 Base Year. Landlord and Tenant hereby agree that this means that Tenant shall pay its pro-rata share (based on the Seating Area Rentable Area and to the Suite 350 Rentable Area) of Operating Expenses and Taxes in the form of additional Rent Adjustments and additional Rent Adjustment Deposits, which shall be calculated as set forth in Article 4 of the ESE Lease, as such was modified by Section 2A of the Lease, such that Tenant shall pay for all utilities related to Suite 350 and to the Seating Area as well as increases in Operating Expenses and Taxes applicable to Suite 350 and to the Seating Area above a 2016 Base Year.

 

  III.

USE

Tenant’s use of Suite 350 and of the Seating Area shall be for General Office purposes.

 

  IV.

TENANT IMPROVEMENTS

Tenant shall make improvements to Suite 350 and to the Seating Area pursuant to the terms of the Workletter attached to the Lease. Landlord shall make a $93,680.00 Tenant Improvement Allowance available to Tenant that Tenant may use to apply to the cost of Tenant’s improvements to Suite 350, as more fully detailed in the Workletter.

 

B-2


  V.

PARKING

Effective upon the Suite 350 Delivery Date, Tenant’s existing rights to utilize eighty-five (85) parking spaces pursuant to the Second Amendment shall be increased by an additional thirteen (13) spaces to become a new total of ninety-eight (98) spaces. As stated in the Second Amendment and re-confirmed here: (i) upon the December 31, 2016 maturity of the Lease as it applies to the Suite 263 Temporary Space or upon Tenant’s earlier termination thereof pursuant to its right outlined in Section V(a) of the Second Amendment, Tenant’s parking shall be reduced by a total of eight (8) spaces to reflect the removal of the Suite 263 Temporary Space from Tenant’s total Premises, and (ii) in the event Tenant terminates its lease of Suite 350 pursuant to the terms of Section X(b) of the Second Amendment, Tenant’s parking would then be decreased by said thirteen (13) spaces. Tenant shall continue to pay Landlord’s quoted rates for all parking and shall be subject to all rules and regulations relating thereto.

 

  VI.

BROKERAGE

Tenant represents and warrants to Landlord that it has been represented in this transaction by CRESA, to whom Landlord has already or will pay a brokerage commission pursuant to a separate agreement, and that no brokerage commission or other such fee shall be due and payable by Landlord to any other representative of Tenant as a result hereof.

 

  VII.

OTHER

Other than the terms of this Third Amendment outlined above, all other terms and conditions of the original Lease and First and Second Amendments thereto remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Third Amendment.

 

TENANT:     LANDLORD:
Berkeley Lights, Inc.,     Emery Station Joint Venture LLC
a Delaware corporation     a California limited liability company
By:  

/s/ Stuart Merkadeau

    By:  

/s/ Richard Robbins

Print Name:   Stuart Merkadeau     Print Name:   Richard K Robbins

 

B-3


EXHIBIT A

SUITE 350 AND SEATING AREA

 

B-4


LOGO


FOURTH AMENDMENT TO LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation 1 Building

5858 Horton St.

Emeryville, California

That certain lease dated November 3, 2015 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord, as such was modified by that First Amendment to Lease dated June 9, 2015 (the “First Amendment”) and by that Second Amendment to Lease dated September 25, 2015 (the “Second Amendment”), and by the terms of that Third Amendment to Lease dated January 11 , 2016 (the “Third Amendment”), collectively constitute the “Lease”. The Lease is hereby further amended by the terms of this Fourth Amendment to Lease (the “Fourth Amendment”), which shall have an effective date of January 18 , 2016 (the “Fourth Amendment Effective Date”). Effective upon the Fourth Amendment Effective Date, the existing Lease and this Fourth Amendment thereto shall thereafter collectively constitute and be referred to as the Lease for all purposes thereunder.

Pursuant to the First Amendment, Landlord made available to Tenant space on the Building’s 2nd floor for purposes of Tenant playing ping-pong. Landlord made the Ping Pong Space available to Tenant at no additional rent but subject to Landlord’s right to terminate Tenant’s right to use said space with two (2) weeks’ notice. Landlord subsequently notified Tenant of Landlord’s decision to invoke this termination option, and Tenant must vacate the existing Ping Pong Space on or before January 22, 2016.

Tenant has advised Landlord that it wishes to continue to have temporary space in which to play ping pong, as well as to use for TRX and also for minor storage purposes. Landlord hereby agrees to add the 1,198 rentable square foot Suite 190 (“Suite 190”, as such is defined on Exhibit A attached hereto) to Tenant’s Premises effective upon the Effective Date of this Fourth Amendment and ending upon December 31, 2016 (the “Suite 190 Lease Term”) for Tenant to utilize for such purposes. Tenant’s lease of Suite 190 shall be pursuant to all the terms and conditions of the Lease other than the obligation to pay rent and expenses. During the Suite 190 Lease Term, Tenant will agree to pay Landlord $500.00 monthly in consideration for Landlord’s utility and repair and maintenance costs associated with Suite 190. Tenant agrees to accept Suite 190 in its existing as-is condition, and to return possession of Suite 190 to Landlord on or before the end of the Suite 190 Lease Term. Tenant’s failure to do so will constitute a default under the Lease.

Tenant represents and warrants to Landlord that it has represented itself in this transaction,, and that no brokerage commission or other such fee shall be due and payable by Landlord to any representative of Tenant as a result hereof.

 

B-1


Other than the terms of this Fourth Amendment outlined above, all other terms and conditions of the original Lease and First, Second and Third Amendments thereto remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Fourth Amendment.

 

TENANT:     LANDLORD:
Berkeley Lights, Inc.,     Emery Station Joint Venture LLC
a Delaware corporation     a California limited liability company
By:  

/s/ Stuart Merkadeau

    By:  

/s/ Richard Robbins

Print Name:   Stuart Merkadeau     Print Name:   Richard K. Robbins

 

B-2


EXHIBIT A

SUITE 190

 

B-3


LOGO


FIFTH AMENDMENT TO LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation 1 Building

5858 Horton St.

Emeryville, California

That certain lease dated November 3, 2014 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord, as such was modified by that First Amendment to Lease dated June 9, 2015 (the “First Amendment”) and by that Second Amendment to Lease dated September 25, 2015 (the “Second Amendment”), by the terms of that Third Amendment to Lease dated January 11, 2016 (the “Third Amendment”), and by the terms of the Fourth Amendment to Lease dated January 18, 2016 (the “Fourth Amendment”), collectively constitute the “Lease”. The Lease is hereby further amended by the terms of this Fifth Amendment to Lease (the “Fifth Amendment”), which shall have an effective date of April 7, 2016 (the “Fifth Amendment Effective Date”). Effective upon the Fifth Amendment Effective Date, the existing Lease and this Fifth Amendment thereto shall thereafter collectively constitute and be referred to as the Lease for all purposes thereunder.

Tenant has requested, and Landlord has agreed, to allow Tenant to expand its Premises by addition thereto of additional space on the 5th floor of the Building. Landlord and Tenant are therefore entering into this Fifth Amendment, whose specific terms and conditions are contained herein. All terms referred to in this Fifth Amendment shall have the meanings attributed to them in the Lease:

 

  I.

FIFTH FLOOR EXPANSION SPACE AND POSSESSION:

The area on the 5th floor of the Building, commonly referred to as Suite 550/555 and more specifically outlined in Exhibit A hereof, shall constitute and be referred to as the “Fifth Floor Expansion Space”. Landlord and Tenant hereby agree that the Fifth Floor Expansion Space measures 3,725 rentable square feet. Tenant shall accept possession of the Fifth Floor Expansion Space from Landlord in its as-is condition, subject only to Landlord’s obligation, at Landlord’s sole cost and expense, to remove therefrom all existing FF&E such as the unconnected fume hoods, office cubicles, etc., such work defined to be the “Fifth Floor Expansion Space Landlord Work”. The date of Landlord’s delivery of possession of the Fifth Floor Expansion to Tenant with the Fifth Floor Expansion Space Landlord Work Substantially Complete shall be referred to as the “Fifth Floor Expansion Space Commencement Date”. Tenant shall be allowed access to the Fifth Floor Expansion Space, and may move equipment, desks and materials into the Fifth Floor Expansion Space, and do such IT work and/or work related to the connection of CDA and vacuum lines, prior to Landlord’s completion of the Fifth Floor Expansion Landlord Work. From and after the Fifth Floor Expansion Space

 

B-1


Commencement Date, the Fifth Floor Expansion Space shall be considered part of Tenant’s Premises and subject to all the terms and conditions relating thereto under the Lease, including Tenant’s obligation to pay the appropriate Tenant Share of Operating Expenses and Taxes as they relate to the Fifth Floor Expansion Space, as more fully detailed below.

In the event that an existing suite of lab and office space which is both immediately adjacent (including across the hall) to Tenant’s existing Premises on the 3rd floor and is roughly equivalent in rentable area to the Fifth Floor Expansion becomes available within three (3) years following the Fifth Floor Commencement Date, Landlord agrees to discuss with Tenant possible opportunities for Tenant to exchange the Fifth Floor Expansion Space for such newly-available space, it being understood that the determination to accomplish such a swap of spaces would be up to both Landlord and Tenant in each’s sole and absolute discretion.

 

  II.

LEASE TERM AS IT RELATES TO THE FIFTH FLOOR EXPANSION SPACE:

The Lease Term as it applies to the Fifth Floor Expansion Space shall commence upon the Fifth Floor Expansion Space Commencement Date and shall expire December 31, 2023, as does the Exiting Premises and Lab Expansion Space, as each is defined in the Second Amendment.

In the event Tenant enters into a new lease of not less than ten (10) years in length for at least 60,000 additional rentable square feet either in: a) the contemplated EmeryStation West Building which may be developed by Landlord’s Affiliate, or b) the Building, or c) some 60,000 rentable square foot combination of additional space in both buildings (the “60,000 Lease Commitment”), Tenant shall have the right, but not the obligation, to terminate the Lease Term early, only as it relates to the Fifth Floor Expansion Space. Such early termination shall be made on no less than ninety (90) days advance written notice to Landlord and is subject to Tenant having signed the 60,000 Lease Commitment, such date to be referred to as the “Fifth Floor Early Termination Date”.

 

  III.

FIFTH FLOOR MONTHLY BASE RENT:

The “Fifth Floor Expansion Space Monthly Base Rent” shall be defined as follows: Effective upon the Fifth Floor Expansion Space Commencement Date, the Fifth Floor Monthly Base Rent shall equal $14,043.00. Effective upon the first anniversary of the Fifth Floor Expansion Space Commencement Date and annually thereafter throughout the Lease Term, the Fifth Floor Expansion Space Monthly Base Rent shall be increased by three percent (3%).

 

  IV.

EXPENSES:

It is Landlord and Tenant’s intent that the Fifth Floor Expansion Space Monthly Base Rent represents a fully triple-net rent. Landlord and Tenant hereby agree that this means that, commencing upon the Fifth Floor Expansion Space Commencement Date, Tenant shall pay its pro-rata share (based on the agreed

 

B-2


3,725 square foot rentable area of the Fifth Floor Expansion Space) of Operating Expenses and Taxes in the form of additional Rent Adjustments and additional Rent Adjustment Deposits, which shall be calculated as set forth in Article 4 of the ESE Lease, as such was modified by Section 2A of the Lease.

 

  V.

USE:

Tenant’s use of the Fifth Floor Expansion Space shall be for laboratory and office purposes.

 

  VI.

TENANT IMPROVEMENT ALLOWANCE:

In addition to the Fifth Floor Expansion Space Landlord Work defined herein, Landlord shall make a tenant improvement allowance available to Tenant in conjunction with Tenant’s lease of the Fifth Floor Expansion Space (the “Fifth Floor TI Allowance”), which shall be available to reimburse Tenant for valid expenditures Tenant makes to the Fifth Floor Expansion Space. The Fifth Floor TI Allowance shall equal $37,000.00, with one-half (1/2) of that amount, or $18,500.00, initially available to Tenant as of the Fifth Floor Expansion Space Commencement Date. The remaining $18,500.00 of the Fifth Floor TI Allowance shall only be made available to Tenant if Tenant, in writing, conclusively waives its right, via formal written notice to Landlord, to terminate the Lease Term as it relates to the Fifth Floor Expansion Space early, as outlined in Section II above. Any improvements Tenant shall make to the Fifth Floor Expansion Space, other than Tenant’s (i) painting of the Fifth Floor Expansion Space (ii) provision of power and data connections into the office portion of the Fifth Floor Expansion Space, and (iii) provision of power, data, CDA and vacuum connections into the laboratory portion of the Fifth Floor Expansion Space, all of which are hereby authorized and approved by Landlord, shall be pursuant to the terms of the Workletter attached to the Lease.

 

  VII.

SECURITY DEPOSIT:

Effective upon the Fifth Amendment Effective Date, the existing Security Deposit called for under the Lease shall be increased pro-rata to reflect the addition of the Fifth Floor Expansion Space rentable area to the rentable area of Tenant’s existing Premises. Within no more than five (5) business days following the Fifth Amendment Effective Date, Tenant shall remit the necessary additional Security Deposit amount to Landlord.

 

  VIII.

BROKERAGE:

Tenant represents and warrants to Landlord that it has been represented in this transaction by CRESA (“Tenant’s Broker”). In the event, and only in the event, Tenant waives in writing its right to terminate the Lease Term early as it relates to the Fifth Floor Expansion Space, Landlord agrees to pay a brokerage commission to Tenant’s Broker pursuant to Landlord’s stated commission schedule for lab leases. Landlord and Tenant hereby agree that no brokerage commission or other such fee shall be due and payable by Landlord to CRESA or to any other representative of Tenant as a result hereof other than as specifically detailed in the Section VI.

 

B-3


  IX.

OTHER;

Other than the terms of this Fifth Amendment outlined above, all other terms and conditions of the Lease remain in full force and effect.

IN WITNESS WHEREOF, the parties have executed this Fifth Amendment.

 

TENANT:     LANDLORD:
Berkeley Lights, Inc.,     Emery Station Joint Venture LLC
a Delaware corporation     a California limited liability company
By:  

/s/ Stuart Merkadeau

    By:  

/s/ Richard Robbins

Print Name:   Stuart L. Merkadeau     Print Name:   Richard K. Robbins

 

B-4


EXHIBIT A

 

B-5


LOGO


SIXTH AMENDMENT TO LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation 1 Building

5858 Horton St.

Emeryville, California

That certain lease dated November 3, 2014 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord, as such was modified by that First Amendment to Lease dated June 9, 2015 (the “First Amendment”) and by that Second Amendment to Lease dated September 25, 2015 (the “Second Amendment”), by the terms of that Third Amendment to Lease dated January 11, 2016 (the “Third Amendment”), by the terms of the Fourth Amendment to Lease dated January 18, 2016 (the “Fourth Amendment”), and by the terms of the Fifth Amendment to Lease dated April 7, 2016 (the “Fifth Amendment”), collectively constitute the “Lease”. The Lease is hereby further amended by the terms of this Sixth Amendment to Lease (the “Sixth Amendment”), which shall have an effective date of September 26, 2016 (the “Sixth Amendment Effective Date”). Effective upon the Sixth Amendment Effective Date, the existing Lease and this Sixth Amendment thereto shall thereafter collectively constitute and be referred to as the Lease for all purposes thereunder. Landlord and Tenant are entering into this Sixth Amendment with reference to the following facts:

 

A.

Pursuant to the terms of the Second Amendment, including Section VI (a) thereof, Tenant leases from Landlord that 2,581 rentable square foot office space located on the second floor of the Building and more commonly referred to as Suite 263 (“Suite 263”, as outlined on Exhibit A hereto). Suite 263 constitutes a portion of Tenant’s Premises. Landlord and Tenant hereby acknowledge and agree that the Lease Term, as it relates specifically to the Suite 263 portion of Tenant’s Premises only, expires December 31, 2016.

 

B.

Pursuant to the terms of the Fifth Amendment, Tenant leases from Landlord that 3,725 rentable square foot lab and office space located on the fifth floor of the Building and commonly referred to as Suites 550/555 (the “Existing Fifth Floor Space”, as outlined on Exhibit A hereto).

 

C.

Tenant has advised Landlord of Tenant’s increased space needs, which Tenant wishes to satisfy in the Building. Tenant has requested, and Landlord has agreed, to allow Tenant to expand Tenant’s Premises by addition thereto of that 7,189 rentable square foot office and lab space located on the fifth floor of the Building and more commonly referred to as Suite 500, as such is more specifically defined below. In conjunction with the expansion of Tenant’s Premises to include Suite 500, Tenant shall return possession of Suite 263 and of the Existing Fifth Floor Space to Landlord, as more specifically detailed herein.

 

B-1


NOW, THEREFORE, in consideration of the above recitals, which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant are entering into this Sixth Amendment, whose specific terms and conditions are contained herein. All terms not specifically defined herein but referred to in this Sixth Amendment shall have the meanings attributed to them in the Lease:

 

  I.

ADDITION OF SUITE 500 TO THE PREMISES:

That specific office and lab space located on the Fifth floor of the Building, commonly referred to as Suite 500 and more specifically outlined in Exhibit A hereof, shall constitute and be referred to herein as “Suite 500”, as outlined on Exhibit A hereto. Landlord and Tenant hereby agree that Suite 500 measures 7,189 rentable square feet. Tenant shall accept possession of Suite 500 from Landlord in its as-is condition, with existing office furniture, fixtures and equipment and laboratory benches, but not other laboratory furniture, fixtures and equipment, remaining in place (“Landlord’s FF&E”), and subject only to industry-standard decontamination of the lab areas within Suite 500, as evidenced by delivery by Landlord to Tenant of third party written documentation thereof. The anticipated date of Landlord’s delivery of possession of Suite 500 to Tenant is October 1, 2016, Tenant understands and acknowledges that Suite 500 is presently leased and occupied by others through September 30, 2016, and that Landlord’s delivery of possession of Suite 500 to Tenant is dependent on said other party’s surrender of possession thereof to Landlord, In the event that Landlord reasonably believes it will not be able to deliver possession to Tenant on October 1, 2016, Landlord will promptly advise Tenant and provide Tenant with an updated anticipated delivery date,

The date of Landlord’s delivery of possession of Suite 500 to Tenant shall be referred to as the “Suite 500 Commencement Date”. From and after the Suite 500 Commencement Date, Suite 500 shall be considered part of Tenant’s Premises and subject to all the terms and conditions relating thereto under the Lease, including Tenant’s obligation to pay the appropriate Tenant Share of Operating Expenses and Taxes as they relate to Suite 500, as more fully detailed below. Within fifteen (15) days of the Suite 500 Commencement Date, Tenant shall execute an acknowledgement thereof in the form of a Commencement Date Agreement, the form of which is attached as an exhibit to the Lease.

Promptly following the Suite 500 Commencement Date, Landlord agrees to place a planter or lattice or similar such barrier on the western-facing outdoor deck accessible from Suite 500 so as to reasonably divide the deck between the various tenants, including Tenant, who have access thereto. Within fifteen (15) days of Tenant’s taking possession of Suite 500, Tenant shall identify to Landlord any broken doom and/or locks, any materially-damaged walls or non-working kitchen appliances which Tenant wishes to be repaired, and Landlord agrees, at its sole cost and expense, to repair said items as quickly after such notice as is commercially-reasonable.

 

B-2


  II.

SUITE 500 MONTHLY BASE RENT:

The “Suite 500 Monthly Base Rent” shall be defined as follows: Effective upon the Suite 500 Commencement Date, the Suite 500 Monthly Base Rent shall equal $27,102.53. Effective April 25, 2017 (i.e. one year following the Commencement Date applicable to the Existing Fifth Floor Space), and annually thereafter throughput the Lease Term, the Suite 500 Monthly Base Rent shall be increased by three percent (3%). Effective upon the Suite 500 Commencement Date, the Monthly Base Rent otherwise called for under the Lease shall be increased by the amount of the Suite 500 Monthly Base Rent.

During the Lease Term, Tenant shall be able to use Landlord’s FF&E free of charge. Tenant hereby agrees to accept Landlord’s FF&E in its existing as-is condition. Landlord makes no representations nor warranties regarding the condition, suitability, utility nor legality of Landlord’s FF&E, nor shall Landlord insure Landlord’s FF&E. Tenant shall use Landlord’s FF&E at Tenant’s sole and absolute risk. Tenant shall maintain and repair Landlord’s FF&E to industry-standard levels and shall return possession of Landlord’s FF&E to Landlord at the end of the Lease Term.

 

  III.

SUITE 500 OPERATING EXPENSES AND TAXES:

It is Landlord’s and Tenant’s mutual intent that the Suite 500 Monthly Base Rent represents a fully triple-net rent. Landlord and Tenant hereby agree that this means that, commencing upon the Suite 500 Commencement Date, Tenant shall pay its pro-rata share (based on the agreed 7,189 square foot rentable area of Suite 500) of Operating Expenses and Taxes in the form of additional Rent Adjustments and additional Rent Adjustment Deposits, which shall be calculated as set forth in Article 4 of the ESE Lease, as such was modified by Section 2A of the Lease.

 

  IV.

LEASE TERM AS IT RELATES TO SUITE 500:

The Lease Term as it applies to Suite 500 shall commence upon the Suite 500 Commencement Date and shall expire December 31, 2023, as does the Lease Term as it relates to the Exiting Premises and to the Lab Expansion Space, as each is defined in the Second Amendment.

In the event Tenant enters into a new lease of not less than ten (10) years in length for at least 60,000 additional rentable square feet either in: a) the contemplated EmeryStation West Building, which may or may not be developed at all, in Landlord’s Affiliate’s sole and absolute discretion, or b) the Building, or c) some 60,000 rentable square foot combination of additional space in both buildings, Tenant shall have the right, but not the obligation, to terminate the Lease Term early, only as it relates to Suite 500 but not to other portions of Tenant’s Premises, such early termination to require no less than ninety (90) business days advance written notice to Landlord and which termination shall occur only upon Tenant’s occupancy in and commencement of paying rent for the afore-mentioned 60,000 square feet of additional space, such date to be referred to as the “Suite 500 Early Termination Date”.

 

  III.

SUITE 500 USE:

Tenant’s use of Suite 500 shall be for laboratory and office purposes.

 

B-3


  V.

SECURITY DEPOSIT:

Effective upon the Fifth Amendment Effective Date, the existing Security Deposit of $189,576.11 called for under the Lease shall be increased by $8,929.60 (intended to be equal to two times the amount of the monthly base rent FOR Suite 500 less that of the Existing Fifth Floor Space less that of Suite 263) to become $198,505.71. Within no more than five (5) business days following the Sixth Amendment Effective Date, Tenant shall remit the necessary additional Security Deposit amount to Landlord in good and collected funds.

 

  VI.

SURRENDER OF EXISTING FIFTH FLOOR SPACE:

Within ten (10) business days of the Suite 500 Commencement Date, Tenant shall surrender possession of the Existing Fifth Floor Space to Landlord in the condition required of Tenant by the terms of the Lease addressing Expiration, the Existing Fifth Floor Space being broom-clean condition and with any and all lab areas de-contaminated and de-commissioned by a third-party experienced in such matters, such de-commissioning and de-contamination evidenced by commercially-reasonable written documentation of Tenant’s delivery of possession of the Existing Fifth Floor Space to Landlord as required in this Section VI shall be referred to as the “Existing Fifth Floor Space Lease Expiration Date”. The Lease Term, as such specifically relates to the Existing Fifth Floor Space but not to any other portions of Tenant’s Premises, shall expire on the Existing Fifth Floor Space Lease Expiration Date.

Tenant’s obligation to pay Monthly Base Rent and Rent Adjustments and Rent Adjustment Deposits applicable to the Existing Fifth Floor Space shall remain in full force and effect until the Existing Fifth Floor Space Lease Expiration Date. Failure by Tenant to so deliver possession of the Existing Fifth Floor Space to Landlord as required in this Section VI shall constitute a Default under the Lease.

 

  VII.

SURRENDER OF SUITE 263:

On or before December 31, 2016, Tenant shall surrender possession of Suite 263 to Landlord in the condition required of Tenant by the terms of the Lease concerning condition of the Premises upon the Lease’s expiration or earlier termination, including return of any Landlord FF&E that may have originally been associated with Suite 263. Tenant’s delivery of possession of Suite 263 to Landlord as required in this Section VII shall be referred to as the “Suite 263 Lease Return Date”.

Tenant’s obligation to pay Monthly Base Rent and Rent Adjustments and Rent Adjustment Deposits applicable to Suite 263 shall remain in full force and effect until the earlier of: a) Landlord’s lease to a third party or any use by Landlord or a third party of Suite 263 if Tenant surrenders Suite 263 to Landlord prior to the current December 31, 2016 Suite 263 lease expiration date, and b) December 31, 2016; at such time the Lease Term shall expire as it specifically relates to Suite 263 but not to any other portions of Tenant’s Premises. Failure by Tenant to so deliver possession of Suite 263 to Landlord as required in this Section VII shall constitute a Default under the Lease.

 

B-4


  VIII.

PARKING:

Pursuant to the Third Amendment, Tenant is presently entitled to up to ninety-eight (98) parking spaces, which total was to drop by eight (8) spaces, to a revised total of ninety (90) spaces, if and when Tenant’s Premises no longer included Suite 263. Landlord and Tenant hereby agree that, effective upon the Sixth Amendment Effective Date, Tenant’s parking shall be increased to a total of one hundred and ten (110) spaces, which total shall not be reduced when Tenant returns possession of Suite 263 to Landlord pursuant to Section VII above. All such parking shall be governed by the terms of the Lease, including Tenant’s obligation to pay Landlord’s quoted rates therefor.

 

  IX.

TENANT IMPROVEMENT ALLOWANCE:

Landlord and Tenant hereby acknowledge the Tenant Improvement Allowance which Landlord made available to Tenant pursuant to Section VI of the Fifth Amendment (the “Fifth Floor TI Allowance”). Notwithstanding the early termination of the Lease Term as it relates to the Existing Fifth Floor space, as such early termination is more fully described in Section VI of this Sixth Amendment above, in the event that any of the Fifth Floor TI Allowance remains un-advanced by Landlord to Tenant upon the Existing Fifth Floor Space Lease Expiration Date as such is defined above (such un-used TI being referred to herein as the “Un-Used Fifth Floor TI”), Landlord hereby agrees to make such Un-Used Fifth Floor TI available to Tenant for Tenant’s use in defraying the total cost of any approved Tenant Alterations made by Tenant to Suite 500. The terms regarding the availability of any Un-Used Fifth Floor TI shall continue to specify, per the agreed terms of Section VI of the Fifth Amendment, that an $18,500.00 portion thereof shall only be made available by Landlord to Tenant if Tenant, in writing, conclusively waives its right, via formal written notice to Landlord, to terminate the Lease Term as it relates to the Suite 500 early, as outlined in Section IV above. Any improvements Tenant shall make to Suite 500 and any advancements by Landlord to Tenant of the Un-Used Fifth Floor TI funds shall be pursuant to the terms of the Workletter attached to the Lease.

 

  X.

MISCELLANEOUS:

This Sixth Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein.

Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.

In the case of any inconsistency between the provisions of the Lease and this Sixth Amendment thereto, the provisions of this Sixth Amendment shall govern and control.

Neither Landlord nor Tenant shall be bound by this Sixth Amendment until each of Landlord and Tenant has executed and delivered the same to the other.

 

B-5


Capitalized terms used in this Sixth Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Sixth Amendment.

Tenant hereby represents to Landlord that it has represented itself in this transaction and has not dealt with any broker or other representative in connection with this Sixth Amendment. Tenant hereby agrees that any compensation that may be due to any broker or representative of Tenant for this transaction shall be wholly the obligation of Tenant and that Landlord shall have no obligation to pay any commission or other form of compensation. Landlord hereby represents to Tenant that it has not been represented by, and has not dealt with any, broker or other representative in connection with this Sixth Amendment. Landlord and Tenant each agrees to defend, indemnify and hold the other harmless from all claims of any brokers claiming to have represented it in connection with this Sixth Amendment other than as set forth in this section.

Landlord and Tenant represent to each other that the individual executing this Sixth Amendment on its behalf has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

This Sixth Amendment may be executed in multiple counterparts each of which is deemed an original but together constitute one and the same instrument. This Sixth Amendment may be executed in so-called “pdf” format and each party has the right to rely upon a pdf counterpart of this Sixth Amendment signed by the other party to the same extent as if such party had received an original counterpart.

(signatures occur on following page)

 

B-6


IN WITNESS WHEREOF, the undersigned have duly executed this Sixth Amendment on the date(s) set forth below, effective as of the Sixth Amendment Effective Date.

 

TENANT:     LANDLORD:
Berkeley Lights, Inc.,     Emery Station Joint Venture LLC
a Delaware corporation     a California limited liability
company    
      By: Emery Station Associates, LLC,
      a California limited liability company
By:  

/s/ Stuart Merkadeau

   
Print Name: Stuart Merkadeau     Its: Managing Member
Its: General Counsel    
      By: Wareham-NZL, LLC, a
      California limited liability company
      Its: Managing Member
      By: Richard K. Robbins, Manager
     

/s/ Richard K. Robins

      Richard K. Robins

 

B-7


EXHIBIT A

SUITE 263, THE EXISTING FIFTH FLOOR SPACE, AND SUITE 500

 

B-8


LOGO


LOGO


SEVENTH AMENDMENT TO LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

EmeryStation 1 Building

5858 Horton St.

Emeryville, California

That certain lease dated November 3, 2014 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord, as such was modified by that First Amendment to Lease dated June 9, 2015 (the “First Amendment”), by that Second Amendment to Lease dated September 25, 2015 (the “Second Amendment”), by that Third Amendment to Lease dated January 11, 2016 (the “Third Amendment”), by that Fourth Amendment to Lease dated January 18, 2016 (the “Fourth Amendment”), that Fifth Amendment to Lease dated April 7, 2016 (the “Fifth Amendment”), and by that Sixth Amendment to Lease dated September 26, 2016 (the “Sixth Amendment”), collectively constitute the “Existing Lease”. The Existing Lease is hereby further amended by the terms of this Seventh Amendment to Lease (the “Seventh Amendment”), which shall have an effective date of December 31, 2016 (the “Seventh Amendment Effective Date”). Effective upon the Seventh Amendment Effective Date, the Existing Lease and this Seventh Amendment thereto shall thereafter collectively constitute and be referred to as the “Lease” for all purposes thereunder. Landlord and Tenant are entering into this Seventh Amendment with reference to the following facts:

A. Pursuant to the terms of the Fourth Amendment, Tenant presently leases from Landlord that 1,198 rentable square foot space located on the first floor of the Building and more commonly referred to as Suite 190 (“Suite 190”, as outlined on Exhibit A hereto). Suite 190 constitutes a portion of Tenant’s Premises. Landlord and Tenant hereby acknowledge and agree that the Lease Term, as it relates specifically to the Suite 190 portion of Tenant’s Premises, is presently set to expire December 31, 2016.

B. Tenant has requested, and Landlord has agreed, to extend the Lease Term as it relates to Tenant’s lease of Suite 190 pursuant to the terms of this Seventh Amendment, below.

C. Tenant and Landlord further acknowledge that the rentable area of Suite 500, which is a portion of Tenant’s Premises and which Tenant leased pursuant to the terms of the Sixth Amendment, was incorrectly stated in the Sixth Amendment, which error shall be addressed by the terms of this Seventh Amendment, below.

NOW, THEREFORE, in consideration of the above recitals, which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant are entering into this Seventh Amendment, whose specific terms and conditions are contained herein. All terms not specifically defined herein but referred to in this Seventh Amendment shall have the meanings attributed to them in the Lease:

 

B-1


I.

EXTENSION OF LEASE TERM AS IT PERTAINS TO SUITE 190:

Landlord and Tenant hereby agree that the Lease Term as it pertains to the Suite 190 shall be extended such that the Expiration Date shall become December 31, 2023. By so doing, the entirety of Tenant’s Premises, other than the Suite 263 portion thereof, for which the Lease Term expires December 31, 2016, shall now have an Expiration Date of December 31, 2023, except as provided in the Second Amendment as it relates to Suite 350, and in the Sixth Amendment as it relates to Suite 500 (where in both cases the Lease Term is it relates to the referenced suites can be terminated early subject to certain conditions). The period from January 1, 2017 through December 31, 2023 shall constitute and be referred to as the “Suite 190 Extension Term”. Tenant shall accept possession of Suite 190 from Landlord at the commencement of the Suite 190 Extension Term in its then as-is condition, with no obligation on the part of Landlord to make any improvements thereto. During the Suite 190 Extension Term, the Suite 190 portion of Tenant’s Premises shall be subject to all the terms and conditions relating thereto under the Lease, including Tenant’s obligation to pay the Suite 190 Monthly Base Rent (as such is defined below) as well as Tenant’s Share of Operating Expenses and Taxes as they relate to Suite 190 (also more fully detailed below).

If, after the Seventh Amendment Effective Date, Tenant enters into a new lease of not less than ten (10) years in length for at least 60,000 additional rentable square feet either in: a) the contemplated EmeryStation West Building, which may or may not be developed at all, in Landlord’s Affiliate’s sole and absolute discretion, or b) at least 20,000 in the Building, or c) some 60,000 rentable square foot combination of additional space in both buildings, Tenant shall have the right, but not the obligation, to terminate the Lease Term early, only as it relates to Suite 190 but not to other portions of Tenant’s Premises, such early termination to require no less than ninety (90) business days advance written notice to Landlord and which termination shall occur only upon Tenant’s occupancy in and commencement of paying rent for the afore-mentioned square feet of additional space, such date to be referred to as the “Suite 190 Early Termination Date”.

 

II.

SUITE 190 MONTHLY BASE RENT:

The “Suite 190 Monthly Base Rent” shall be $1,800.00 per month during calendar year 2017. Effective January 1, 2018 and annually thereafter throughout the Suite 190 Extension Term, the Suite 190 Monthly Base Rent shall be increased by three percent (3%).

 

III.

SUITE 190 OPERATING EXPENSES AND TAXES:

It is Landlord’s and Tenant’s mutual intent that the Suite 190 Monthly Base Rent represents a fully-serviced rent subject to a 2017 Base Year. Landlord and Tenant hereby agree that this means that, commencing upon January 1, 2018 and thereafter throughout the Suite 190 Extension Term, Tenant shall pay its pro-rata share of all increases in Operating Expenses and Taxes for any calendar year to the extent they exceed the respective amounts of Operating Expenses and Taxes during calendar year 2017, such payment by Tenant being made in the form of additional Rent Adjustments and additional Rent Adjustment Deposits, which shall be calculated as set forth in Article 4 of the ESE Lease, as such was modified by Section 2A of the Lease.

 

B-2


III.

SUITE 190 USE:

Tenant’s use of Suite 190 shall be for office, storage and/or private athletic workout purposes.

 

IX.

CORRECTION OF SUITE 500 RENTABLE SQUARE FOOTAGE:

Landlord and Tenant acknowledge and agree that the rentable square footage of Suite 500, as defined in the Sixth Amendment, was incorrectly listed as 7,189 rentable square feet (in Recital C and in Sections I and III), and is actually 7,819 rentable square feet and shall be revised to be this latter 7,819 rentable square foot amount for all purposes under the Lease. Landlord and Tenant hereby agree to correct this error effective upon the Seventh Amendment Effective Date. However, Landlord and Tenant hereby agree that Tenant’s Monthly Base Rent will be calculated using the lower, 7,189 rentable square foot figure up to and including June 30, 2017 and that Monthly Base Rent shall be calculated using the otherwise correct 7,819 rentable square foot figure commencing July 1, 2017 and thereafter throughout the expiration or the Lease Term (including any extensions thereof). Tenant’s Share of Operating Expenses and Taxes, as referenced in Section III of the Sixth Amendment, shall be calculated utilizing the correct 7,819 rentable square footage figure commencing January 1, 2017.

 

B-3


X.

MISCELLANEOUS:

This Seventh Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein.

Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.

In the case of any inconsistency between the provisions of the Lease and this Seventh Amendment thereto, the provisions of this Seventh Amendment shall govern and control.

Neither Landlord nor Tenant shall be bound by this Seventh Amendment until each of Landlord and Tenant has executed and delivered the same to the other.

Capitalized terms used in this Seventh Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Seventh Amendment.

Tenant hereby represents to Landlord that it has represented itself in this transaction and has not dealt with any broker or other representative in connection with this Seventh Amendment. Tenant hereby agrees that any compensation that may be due to any broker or representative of Tenant for this transaction shall be wholly the obligation of Tenant and that Landlord shall have no obligation to pay any commission or other form of compensation. Landlord hereby represents to Tenant that it has not been represented by, and has not dealt with any, broker or other representative in connection with this Seventh Amendment. Landlord and Tenant each agrees to defend, indemnify and hold the other harmless from all claims of any brokers claiming to have represented it in connection with this Seventh Amendment other than as set forth in this section.

Landlord and Tenant represent to each other that the individual executing this Seventh Amendment on its behalf has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

This Seventh Amendment may be executed in multiple counterparts each of which is deemed an original but together constitute one and the same instrument. This Seventh Amendment may be executed in so-called “pdf” format and each party has the right to rely upon a pdf counterpart of this Seventh Amendment signed by the other party to the same extent as if such party had received an original counterpart.

(signatures occur on following page)

 

B-4


IN WITNESS WHEREOF, the undersigned have duly executed this Seventh Amendment on the date(s) set forth below, effective as of the Seventh Amendment Effective Date.

 

TENANT:     LANDLORD:
Berkeley Lights, Inc.,     Emery Station Joint Venture LLC,
a Delaware corporation     a California limited liability company
      By: Emery Station Associates, LLC,
By:  

/s/ Stuart Merkadeau

    a California limited liability company
Print Name: Stuart Merkadeau          
      Its:   Managing Member
       

By: Wareham-NZL, LLC, a California

limited liability company

          Its:   Managing Member
            By: Richard K. Robbins, Manager
           

/s/ Richard K. Robbins

            Richard K. Robbins

 

B-5


EXHIBIT A

SUITE 190

 

B-6


LOGO


EIGHTH AMENDMENT TO LEASE

by and between

EMERY STATION JOINT VENTURE, LLC (LANDLORD),

and

BERKELEY LIGHTS, INC. (TENANT)

That certain lease dated November 3, 2014 by and between Berkeley Lights, Inc., a Delaware corporation, as Tenant, and Emery Station Joint Venture, LLC, a California limited liability company, as Landlord (the “Original Lease”), as such was modified by that First Amendment to Lease dated June 9, 2015 (the “First Amendment”), by that Second Amendment to Lease dated September 25, 2015 (the “Second Amendment”), by that Third Amendment to Lease dated January 11, 2016 (the “Third Amendment”), by that Fourth Amendment to Lease dated January 18, 2016 (the “Fourth Amendment”), that Fifth Amendment to Lease dated April 7, 2016 (the “Fifth Amendment”), by that Sixth Amendment to Lease dated September 26, 2016 (the “Sixth Amendment”), and by that Seventh Amendment to Lease dated December 31, 2016 (the “Seventh Amendment”), collectively constitute the “Existing Lease”. The Existing Lease is hereby further amended by the terms of this Eighth Amendment to Lease (the “Eighth Amendment”), which shall have an effective date of June 18, 2020 (the “Eighth Amendment Effective Date”). Effective upon the Eighth Amendment Effective Date, the Existing Lease and this Eighth Amendment thereto shall thereafter collectively constitute and be referred to as the “Lease” for all purposes thereunder. Landlord and Tenant are entering into this Eighth Amendment with reference to the following facts:

 

A.

Pursuant to the terms of the Existing Lease, Tenant presently leases from Landlord a Premises consisting of various suites located on the first, third and fifth floors of the Building commonly referred to as EmeryStation 1, which is located at 5858 Horton Street in Emeryville, CA.

 

B.

Concurrently herewith, Tenant and Landlord’s Affiliate, Emery Station Office II, LLC, are entering into a lease pursuant to which Tenant shall lease certain space on the second floor of the building at 5980 Horton Street, commonly referred to as EmeryStation North, such lease referred to herein as the “ESNorth Lease”.

 

C.

The Lease Term presently is set to expire December 31, 2023. Tenant wishes to extend the Term of the Lease such that expires upon the same date as the Expiration Date of the Initial Term of the ESNorth Lease.

 

D.

Tenant wishes to terminate the Lease Term early as it relates to the Suite 500 portion of Tenant’s Premises (“Suite 500”, as such is more fully defined in the Existing Lease including the Sixth Amendment thereto), and return possession thereof to Landlord, and concurrently therewith Landlord shall make Suite 150 available to Tenant for temporary occupancy.

NOW, THEREFORE, in consideration of the above recitals, which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Landlord and Tenant are entering into this Eighth Amendment, whose specific terms and conditions are contained herein. The parties acknowledge the truthfulness of the foregoing Recitals, which are hereby incorporated into this Eighth Amendment.


I.

EXTENSION OF LEASE TERM:

Landlord and Tenant hereby agree to extend the Lease Term applicable to the Premises such that its Expiration Date shall become the Expiration Date of the Initial Term of ESNorth Lease. The Expiration Date of the Initial Term of the ESNorth Lease is set forth in Section 1.1(7) of the ESNorth Lease, and the Initial Term of the ESNorth Lease is subject to extension by an additional thirty (30) months pursuant to Section 2.2(c) of the ESNorth Lease. The period commencing January 1, 2024 and ending upon the expiry of the Initial Term of the ESNorth Lease shall be referred to herein as the “Extension Term”. Within no more than fifteen (15) days following the initial determination of the ESNorth Lease Expiration Date, Landlord and Tenant hereby agree to enter into an amendment to the Lease setting forth the new Expiration Date of the Lease. In the event the Initial Term of the ESNorth Lease is subsequently extended by an additional thirty (30) months pursuant to Section 2.2(c) of the ESNorth Lease, within fifteen (15) days of such extension, Landlord and Tenant hereby agree to enter into an amendment of the Lease to document the resulting extension of the Extension Term of this Lease.

Landlord and Tenant hereby acknowledge and agree that the Existing Lease provides Tenant with one (1) five (5) year option to extend the Term, applicable to the entirety of the Premises (such option being more fully described in Section VII of the Second Amendment and Section 4 of the Original Lease), and Landlord and Tenant agree that such extension option is applicable independent of whether the Initial Term is extended by an additional thirty (30) months pursuant to the above paragraph or not.

 

II.

SURRENDER OF SUITE 500:

Landlord and Tenant hereby agree that the Term of the Lease as it specifically relates to the Suite 500 portion of the Premises shall terminate two (2) weeks following the Eighth Amendment Effective Date (the “Suite 500 Termination Date”). Tenant understands and acknowledges that Landlord intends to lease Suite 500 to third-party tenant Nutcracker Therapeutics, Inc. (“Nutcracker”). Landlord understands and acknowledges, and represents Nutcracker understands and acknowledges, that Berkeley Lights intends to remain in occupancy of a portion of Suite 500 from the Suite 500 Termination Date through October 31, 2020 pursuant to a separate arrangement with Nutcracker, said area consisting of the two lab rooms, adjacent IT room, kitchen area and server closet and referred to herein as the “BLI Temporary Area”. Commencing on the Eighth Amendment Effective Date and at all times while occupying the BLI Temporary Area, Tenant shall have the right to pass through the other portion of Suite 500 (the portion otherwise vacated by Tenant) to access the 5th floor elevator lobby, stair case and restrooms of the Building. On or before the Suite 500 Termination Date, Tenant shall return possession of Suite 500 (except for the BLI Temporary Area) to Landlord in its as-is condition and broom clean. On or before October 31, 2020, Tenant shall return possession of the BLI Temporary Area to Landlord in its then as-is condition, broom clean, and with all lab areas fully decontaminated and decommissioned as evidenced by written, industry-standard documentation issued by a

 

2


third-party experienced in such matters (or with Nutcracker’s agreement, given to Landlord, that the decommissioning and decontamination of the lab areas that Landlord was obligated to do prior to delivery of Suite 500 to Nutcracker can instead be done by Berkeley Lights). Tenant’s failure to return possession of Suite 500 to Landlord as set forth above shall constitute a Default under the Lease. Upon the Suite 500 Termination Date: a) Tenant’s Monthly Base Rent shall be reduced by the amount of Monthly Base Rent applicable to Suite 500, as such is set forth in the Sixth and Seventh Amendments to the Existing Lease, b) Tenant’s Share shall be recalculated to reflect the reduction in the Premises’ rentable area resulting from the deletion of Suite 500 from the Premises, c) the number of Parking Spaces available to Tenant under the Lease will be unchanged but on September 30, 2020 shall be reduced by the Parking Spaces provided to Tenant pursuant to the Sixth Amendment pursuant to which Suite 500 was leased, and d) the Security Deposit shall be reduced pro-rata to reflect the reduction in the Premises’ rentable area due to the deletion of Suite 500 from the Premises (the amount of said reduction being referred to herein as the “Suite 500 Security Deposit Refund Amount”). Landlord agrees to remit the Suite 500 Security Deposit Refund to Tenant within fifteen (15) business days of the Suite 500 Termination Date. Further, Landlord shall pay, or shall confirm that Nutcracker shall pay Tenant’s costs incurred in its moving from Suite 500, except for costs incurred in moving from the BLI Temporary Area. Such payment to be made within thirty (30) days of Tenant’s submission of such moving costs.

 

III.

TEMPORARY USE OF SUITE 150:

In consideration of Tenant’s agreement to vacate Suite 500 (other than the BLI Temporary Space portion thereof) no later than two weeks following the Eighth Amendment Effective Date, Landlord agrees to allow Tenant to temporarily occupy Suite 150 (“Suite 150”, as more fully defined in Exhibit A hereto) for a period commencing upon the Eighth Amendment Effective Date and ending no later than October 31, 2020 (the “Temporary Space Lease Term”). Landlord will deliver possession of Suite 150 to Tenant promptly following the Eighth Amendment Effective Date in its then as-is condition, with no obligation to alter or improve it in any way for Tenant’s occupancy, except that Landlord shall ensure that all plumbing is in good and operable order. Landlord agrees that Suite 150 shall be free of rent and operating expenses for the entirety of the Temporary Space Lease Term. On or before the October 31, 2020 expiry of the Temporary Space Lease Term, Tenant shall vacate Suite 150 and return possession thereof to Landlord broom clean, in the condition extant upon Tenant’s initial occupancy thereof, normal wear and tear excepted. Failure by Tenant to vacate Suite 150 as described herein shall constitute a Default under the Lease.

 

IV.

RENT DURING THE EXTENSION TERM:

Up to and including December 31, 2023, Monthly Base Rent applicable to the Premises shall be calculated pursuant to the terms of the Existing Lease, as such calculation may be adjusted as a result of Tenant’s surrender of Suite 500, as more fully described in Section II above. Effective January 1, 2024 and annually thereafter during the Extension Term (as such Extension Term may be further extended by an additional thirty (30) months pursuant to Section I above), Monthly Base Rent shall increase by three percent (3%) annually.

 

3


IV.

DEFAULT:

In addition to the provisions regarding Default in the Existing Lease, a default by Tenant under the ESNorth Lease shall constitute a Default under this Lease.

 

V.

LEASE STATUS:

As a material inducement to Landlord to enter into this Eighth Amendment, Tenant warrants, represents and certifies to Landlord that: (a) to the best of Tenant’s actual knowledge, Landlord is not in breach or default under the Lease, nor has any event occurred, which, with the passage of time or the giving of notice, or both, would constitute a breach of default by Landlord; (b) no actions, whether voluntary of otherwise, are pending against Tenant under the bankruptcy laws of the United States or any state thereof; (c) Tenant has not assigned the Lease or subleased any portion of the Premises; and (d) the Lease, as amended by this Eighth Amendment, constitutes the complete agreement of Landlord and Tenant with respect to the Premises, and there are no other amendments, oral or written, to the Lease.

As a material inducement to Tenant to enter into this Eighth Amendment, Landlord warrants, represents and certifies to Tenant that: (a) to Landlord’s actual knowledge, Tenant is not in breach or default under the Lease, nor has any event occurred, which, with the passage of time or the giving of notice, or both, would constitute a breach of default by Tenant; (b) no actions, whether voluntary of otherwise, are pending against Landlord under the bankruptcy laws of the United States or any state thereof; and (c) the Lease, as amended by this Eighth Amendment, constitutes the complete agreement of Landlord and Tenant with respect to the Premises, and there are no other amendments, oral or written, to the Lease.

 

VI.

MISCELLANEOUS:

This Eighth Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein.

Except as herein modified or amended, the provisions, conditions and terms of the Lease shall remain unchanged and in full force and effect.

Capitalized terms used in this Eighth Amendment shall have the same definitions as set forth in the Lease to the extent that such capitalized terms are defined therein and not redefined in this Eighth Amendment.

In the case of any inconsistency between the provisions of the Lease and this Eighth Amendment thereto, the provisions of this Eighth Amendment shall govern and control.

Neither Landlord nor Tenant shall be bound by this Eighth Amendment until each of Landlord and Tenant has executed and delivered the same to the other. This Eighth Amendment may be executed in counterparts each of which counterparts when taken together shall constitute one and the same agreement. Any facsimile, PDF or other electronic signature shall constitute a valid and binding method for executing this Eighth Amendment. Executed counterparts of this Eighth Amendment exchanged by facsimile transmission, PDF email, or other electronic means shall be fully enforceable.

 

4


Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this Eighth Amendment. Tenant agrees to indemnify and hold Landlord, its members, principals, beneficiaries, partners, officers, directors, employees, mortgagee(s) and agents, and the respective principals and members of any such agents harmless from all claims of any brokers claiming to have represented Tenant in connection with this Eighth Amendment. Landlord hereby represents to Tenant that Landlord has dealt with no broker in connection with this Eighth Amendment. Landlord agrees to indemnify and hold Tenant, its members, principals, beneficiaries, partners, officers, directors, employees, and agents, and the respective principals and members of any such agents harmless from all claims of any brokers claiming to have represented Landlord in connection with this Eighth Amendment.

Landlord and Tenant represent to each other that the individual executing this Eighth Amendment on its behalf has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.

Force Majeure” as used in this Eight Amendment shall mean any accident, casualty, act of God, war or civil commotion, strike or labor troubles, governmental moratorium or other governmental action (including, without limitation, the passing of any law, rule or regulation or inaction due to the incidence of disease or other illness that reaches outbreak, epidemic and/or pandemic proportions (including, without limitation, COVID-19)), but only to the extent such law, rule or regulation actually prevents the occupancy of the Premises, conduct of business from the Premises, or the conduct of physical construction work within the Premises), or any other causes of any kind whatsoever beyond the reasonable control of Landlord or Tenant, as applicable, including without limitation riots, terrorism, governmental laws, regulations or restrictions, labor or materials shortages, water shortages, energy shortages or governmental preemption in connection with an act of God, a national emergency, or by reason of Law, or by reason of the conditions of supply and demand which have been or are affected by act of God, war or other emergency. Notwithstanding anything to the contrary contained in this Eighth Amendment and Lease, Landlord’s and Tenant’s obligations pursuant to the Lease, as amended by this Eight Amendment, shall be subject to Force Majeure delays.

[The remainder of this page intentionally blank. Signature page follows.]

 

5


IN WITNESS WHEREOF, the undersigned have duly executed this Eighth Amendment on the date(s) set forth below, effective as of the Eighth Amendment Effective Date.

 

TENANT:    LANDLORD:

Berkeley Lights, Inc.,

a Delaware corporation

  

Emery Station Joint Venture LLC,

a California limited liability company

By:     /s/ Stuart L. Merkadeau                

Print Name:     Stuart L. Merkadeau         

  

By: Emery Station Associates, LLC,

a California limited liability company

  

Its: Managing Member

  

By:   Wareham-NZL, LLC,

a California limited liability company

  

Its: Managing Member

  

By:    Richard K. Robbins,

Manager

  

/s/ Richard K. Robbins                         

  

Richard K. Robbins

 

6


EXHIBIT A

SUITE 150

 

7

Exhibit 10.12(d)

OFFICE/LABORATORY LEASE

BETWEEN

EMERY STATION OFFICE II, LLC (LANDLORD)

AND

BERKELEY LIGHTS, INC. (TENANT)

5980 Horton Street

Emeryville, California


CONTENTS

 

                 Page  

ARTICLE 1 BASIC LEASE PROVISIONS

     1  
    1.1       BASIC LEASE PROVISIONS      1  
    1.2       ENUMERATION OF EXHIBITS AND RIDER      5  
    1.3       DEFINITIONS      5  

ARTICLE 2 PREMISES, TERM, FAILURE TO GIVE POSSESSION, AND PARKING

     11  
    2.1       LEASE OF PREMISES      11  
    2.2       TERM      15  
    2.3       FAILURE TO DELIVER POSSESSION      17  
    2.4       CONDITION OF PREMISES      18  
    2.5       PARKING      18  

ARTICLE 3 RENT

     19  

ARTICLE 4 RENT ADJUSTMENTS AND PAYMENTS

     19  
    4.1       RENT ADJUSTMENTS      19  
    4.2       STATEMENT OF LANDLORD      20  
    4.3       BOOKS AND RECORDS      21  
    4.4       TENANT OR LEASE SPECIFIC TAXES      21  

ARTICLE 5 SECURITY

     22  

ARTICLE 6 SERVICES

     23  
    6.1       LANDLORD’S GENERAL SERVICES      23  
    6.2       UTILITIES AND JANITORIAL SERVICES      24  
    6.3       ADDITIONAL AND AFTER HOUR SERVICES      25  
    6.4       TELEPHONE SERVICES      25  
    6.5       DELAYS IN FURNISHING SERVICES      26  
    6.6       CHOICE OF SERVICE PROVIDER      26  
    6.7       SIGNAGE      26  

ARTICLE 7 USE OF PREMISES; LANDLORD’S ACCESS RIGHTS

     27  
    7.1       USE OF PREMISES      27  
    7.2       LANDLORD ACCESS TO PREMISES; APPROVALS      37  
    7.3       QUIET ENJOYMENT      38  
    7.4       TRANSPORTATION DEMAND MANAGEMENT PROGRAM      38  

ARTICLE 8 MAINTENANCE

     39  

 

i


    8.1       LANDLORD’S MAINTENANCE      39  
    8.2       TENANT’S MAINTENANCE      39  
    8.3       SUDDEN WATER INTRUSION.      40  

ARTICLE 9 ALTERATIONS AND IMPROVEMENTS

     41  
    9.1       TENANT ALTERATIONS      41  
    9.2       LIENS      42  

ARTICLE 10 ASSIGNMENT AND SUBLETTING

     43  
    10.1       ASSIGNMENT AND SUBLETTING      43  
    10.2       RECAPTURE      45  
    10.3       EXCESS RENT      45  
    10.4       TENANT LIABILITY      46  
    10.5       ASSUMPTION AND ATTORNMENT      46  
    10.6       PROCESSING EXPENSES      47  
    10.7       EFFECT OF IMPERMISSIBLE TRANSFER      47  

ARTICLE 11 DEFAULT AND REMEDIES

     47  
    11.1       DEFAULT      47  
    11.2       LANDLORD’S REMEDIES      48  
    11.3       ATTORNEY’S FEES      51  
    11.4       BANKRUPTCY      51  
    11.5       LANDLORD’S DEFAULT      52  

ARTICLE 12 SURRENDER OF PREMISES

     52  
    12.1       IN GENERAL      52  
    12.2       LANDLORD’S RIGHTS      53  

ARTICLE 13 HOLDING OVER

     53  

ARTICLE 14 DAMAGE BY FIRE OR OTHER CASUALTY

     54  
    14.1       SUBSTANTIAL UNTENANTABILITY      54  
    14.2       INSUBSTANTIAL UNTENANTABILITY      55  
    14.3       RENT ABATEMENT      55  
    14.4       WAIVER OF STATUTORY REMEDIES      55  

ARTICLE 15 EMINENT DOMAIN

     55  
    15.1       TAKING OF WHOLE OR SUBSTANTIAL PART      55  
    15.2       TAKING OF PART      56  
    15.3       COMPENSATION      56  

ARTICLE 16 INSURANCE

     56  

 

ii


    16.1       TENANT’S INSURANCE      56  
    16.2       FORM OF POLICIES      57  
    16.3       LANDLORD’S INSURANCE      57  
    16.4       WAIVER OF SUBROGATION      58  
    16.5       NOTICE OF CASUALTY      59  

ARTICLE 17 WAIVER OF CLAIMS AND INDEMNITY

     59  
    17.1       WAIVER OF CLAIMS      59  
    17.2       INDEMNITY      59  
    17.3       WAIVER OF CONSEQUENTIAL DAMAGES      60  

ARTICLE 18 RULES AND REGULATIONS

     60  
    18.1       RULES      60  
    18.2       ENFORCEMENT      61  

ARTICLE 19 LANDLORD’S RESERVED RIGHTS

     61  

ARTICLE 20 ESTOPPEL CERTIFICATE

     61  
    20.1       IN GENERAL      61  
    20.2       ENFORCEMENT      62  

ARTICLE 21 RELOCATION OF TENANT

     62  

ARTICLE 22 REAL ESTATE BROKERS

     63  

ARTICLE 23 MORTGAGEE PROTECTION

     63  
    23.1       SUBORDINATION AND ATTORNMENT      63  
    23.2       MORTGAGEE PROTECTION      64  

ARTICLE 24 NOTICES

     64  

ARTICLE 25 FURNITURE, FIXTURES AND EQUIPMENT

     65  

ARTICLE 26 MISCELLANEOUS

     65  
    26.1       LATE CHARGES      65  
    26.2       NO JURY TRIAL; VENUE; JURISDICTION      66  
    26.3       NO DISCRIMINATION      66  
    26.4       FINANCIAL STATEMENTS      66  
    26.5       OPTION      67  
    26.6       TENANT AUTHORITY      67  
    26.7       ENTIRE AGREEMENT      67  
    26.8       MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE      67  
    26.9       EXCULPATION      67  

 

iii


    26.10       ACCORD AND SATISFACTION      67  
    26.11       LANDLORD’S OBLIGATIONS ON SALE OF BUILDING      68  
    26.12       BINDING EFFECT      68  
    26.13       CAPTIONS      68  
    26.14       TIME; APPLICABLE LAW; CONSTRUCTION      68  
    26.15       ABANDONMENT      69  
    26.16       LANDLORD’S RIGHT TO PERFORM TENANT’S DUTIES      69  
    26.17       SECURITY SYSTEM      69  
    26.18       NO LIGHT, AIR OR VIEW EASEMENTS      69  
    26.19       RECORDATION      69  
    26.20       SURVIVAL      70  
    26.21       OFAC      70  
    26.22       INSPECTION BY A CASP IN ACCORDANCE WITH CIVIL CODE SECTION 1938.      70  
    26.23       COUNTERPARTS      71  
    26.24       EXHIBITS AND RIDERS      71  

 

iv


OFFICE/LABORATORY LEASE

ARTICLE 1

BASIC LEASE PROVISIONS

 

1.1

BASIC LEASE PROVISIONS

In the event of any conflict between these Basic Lease Provisions and any other Lease provision, such other Lease provision shall control.

 

  (1)

BUILDING AND ADDRESS:

5980 Horton Street

Emeryville, California 94608

 

  (2)

LANDLORD AND ADDRESS:

Emery Station Office II, LLC

1120 Nye Street, Suite 400

San Rafael, California 94901

Notices to Landlord shall be addressed:

Emery Station Office II, LLC

c/o Wareham Property Group

1120 Nye Street, Suite 400

San Rafael, California 94901

With a copy to:

Stewart Ward & Josephson LLP

1601 Response Road, Suite 360

Sacramento, California 95815

Attention: Winnifred C. Ward, Esq.

And to:

Shartsis Friese LLP

One Maritime Plaza, 18th Floor

San Francisco, California 94901

Attention: Senior Real Estate Partner

And, for the purposes of notices of default under Section 23.2, to:

Principal Life Insurance Company

c/o Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, Iowa 50392-1450

 

1


(as such address may change from time to time pursuant to the provisions of Section 23.2)

 

  (3)

TENANT AND NOTICE ADDRESS:

 

  (a)

Name and Entity:

Berkeley Lights, Inc., a Delaware corporation

 

  (b)

Federal Tax Identification Number:

35-2415390

Tenant shall promptly notify Landlord of any change in the foregoing items.

 

  (c)

Notices to Tenant shall be addressed:

Prior to the Commencement Date:

Berkeley Lights, Inc.

5858 Horton Street, Suite 320

Emeryville, CA 94608

Attention: VP, Finance

With a copy by email to: agreements@berkeleylights.com

With a copy to:

Akerman LLP

750 Ninth Street, N.W., Suite 750

Washington, D.C. 20001

Attention: James M. Burns, Esq.

On and after the Commencement Date:

The same as above.

(4)     DATE OF LEASE: As of June 24, 2020

(5)     INITIAL TERM: Commencing on the Commencement Date, and ending on the last day of the sixtieth (60th) full calendar month following the Commencement Date, subject to the terms of Section 2.2(c) below

(6)     PROJECTED COMMENCEMENT DATE: October 1, 2020

(7)     EXPIRATION DATE: The last day of the sixtieth (60th) full calendar month following the Commencement Date, subject to the terms of Section 2.2(c) below

 

2


(8)       MONTHLY BASE RENT:

 

MONTHS OF TERM

  

MONTHLY BASE

RENT

  

APPROXIMATE MONTHLY

RATE PER RENTABLE

SQUARE FOOT OF

PREMISES

*Months 01 – 07

   $47,834.88    $1.375

Months 08 – 12

   $95,669.75    $2.75

Months 13 – 24

   $98,539.84    $2.83 (approx.)

Months 25 – 36

   $101,496.04    $2.92 (approx.)

Months 37 – 48

   $104,540.92    $3.00 (approx.)

Months 49 – 60

   $107,677.15    $3.10 (approx.)

Months 61 – 72**

   $110,907.46**    $3.19 (approx.)**

Months 73 – 84**

   $114,234.68**    $3.28 (approx.)**

Months 85 – 90**

   $117,661.72**    $3.38 (approx.)**

 

*

“Month 1” will include any partial calendar month following the Commencement Date if the Commencement Date is other than the first (1st) day of a calendar month, and in the event Month 1 includes any partial calendar month, Tenant shall pay the prorated amount of Monthly Base Rent for such partial calendar month pursuant to Article 3 in addition to the Monthly Base Rent for the first full calendar month of the Term.

**

Payable if Required Extension Term applies pursuant to Section 2.2(c) below.

(9)      PREMISES: The entirety of the leasable area located on the second (2nd) floor of the Building, as outlined on Exhibit A hereto

(10)    RENTABLE AREA OF THE PREMISES: 34,789 square feet

(11)    TEMPORARY SPACE: As defined in Section 2.1(b) below.

(12)    SECURITY DEPOSIT: $304,488.12 (subject to reduction pursuant to the terms of Section 5(c) below)

(13)    REDUCED SECURITY DEPOSIT: $191,339.50

(14)    SUITE NUMBER OF PREMISES: 200 or 2nd Floor

(15)    TENANT’S USE OF PREMISES: General office and research and development laboratory use (subject to the terms of Section 7.1(a) below) and any lawful or incidental purposes specifically related thereto

 

3


(16)    PARKING:

(a)    Premises: Up to 99 unreserved parking spaces in Terraces Garage, plus five (5) “premium” parking spaces located within the Building, or (as to all 104 spaces) such other location within a 1-block radius of the Premises, as reasonably determined by Landlord.

(b)    5980 Horton Required Expansion Space: Up to three (3) unreserved parking spaces per 1,000 rentable square feet of the 5980 Horton Required Expansion Space (if any) in Terraces Garage, or such other location within a 1-block radius of the Premises, as reasonably determined by Landlord.

(17)    BROKERS:

 

Landlord’s Broker:

   N/A

Tenant’s Broker:

   N/A

(18)    TENANT IMPROVEMENT ALLOWANCE:

(a)    Notwithstanding anything in this Lease to the contrary, Landlord shall provide Tenant a tenant improvement allowance to be utilized to pay for Tenant Improvement Allowance Items (as such are defined in the Workletter attached to this Lease), in the amount of up to $1,360,981.00 (i.e., $1,100,000.00, plus $260,981.00 in recognition of the fact that Tenant is not represented by a broker in connection with this Lease) (the “Tenant Improvement Allowance”). Provided that Tenant is not in Default (beyond all applicable notice and cure periods) under this Lease, the Tenant Improvement Allowance shall be drawn down pursuant to the terms of the Workletter. In the event Tenant elects Tenant’s Contraction Right as such is set forth in Section 2.1(c) hereof, the Tenant Improvement Allowance shall be reduced proportionately to reflect the reduction in the Premises’ Rentable Area. Until such time as either: (i) Tenant has waived, in writing, Tenant’s Contraction Right, or (ii) the deadline for Tenant to give Tenant’s Contraction Notice has passed without Tenant having provided such notice to Landlord, the maximum amount of Tenant Improvement Allowance to which Tenant shall be entitled is fifty percent (50%) of the above amount, namely $680,490.50.

(b)    If the Required Extension Term applies to extend Initial Term as specified in Section 2.2(c) below, Landlord shall provide Tenant an additional allowance to be utilized to pay for Alterations pursuant to Article 9 of this Lease in the amount of up to $65,229.00 (the “Required Extension Term Allowance”). Provided that Tenant is not in Default (beyond all applicable notice and cure periods) under this Lease, Tenant may apply the Required Extension Term Allowance to the cost of such Alterations, in accordance with the terms of Article 9.

(c)    In addition to the Tenant Improvement Allowance and the Required Extension Term Allowance (if any), Tenant may elect, by written notice to Landlord delivered not later than the end of the 12th month after the Commencement Date, to obtain an additional tenant improvement allowance from Landlord in an amount up to $250,000.00 (the “Additional Tenant Improvement Allowance”), to be used solely for the purpose of installing additional cooling capacity to serve the BSL-1/BSL-2 Labs (if any) (the “BSL-1/BSL-2 Lab Cooling Improvements”). Provided that Tenant is not in Default (beyond all applicable notice and cure

 

4


periods) under this Lease, the Additional Tenant Improvement Allowance may be utilized, pursuant to the terms of the Workletter, to pay for the cost of the BSL-1/BSL-2 Lab Cooling Improvements (the “BSL-1/BSL-2 Lab Cooling Improvement Costs”).

(d)    Any amounts of the Additional Tenant Improvement Allowance requested by Tenant and funded by Landlord shall repaid by Tenant to Landlord by amortizing those amounts (the “Amortized Tenant Improvement Allowance”) over a period that commences upon the funding thereof to Tenant and ending on the date that is ten (10) years after the expiration of the five-year Initial Term as set forth in Section 1.1(5) (the “Amortization Period”), at an annual interest rate of eight percent (8%), and shall be paid by Tenant on a monthly basis during the Initial Term (as extended by the Required Extension Term, if applicable) by increasing the Monthly Base Rent amount otherwise payable under this Lease, which payments shall commence on the first (1st) day of the month following the month in which a disbursement of the Additional Tenant Improvement Allowance is funded by Landlord (the “Amortized Tenant Improvement Allowance Payments”). Notwithstanding any contrary provisions of this Section 1.1(18), the unamortized portion of the Amortized Tenant Improvement Allowance that would have been amortized over the then-remaining portion of the Amortization Period shall become immediately due and payable to Landlord by Tenant upon the occurrence of a Default by Tenant (i.e., a default or breach that remains uncured following any applicable notice and/or cure period).

 

1.2

ENUMERATION OF EXHIBITS AND RIDER

The Exhibits and Rider set forth below and attached to this Lease are incorporated in this Lease by this reference:

 

EXHIBIT A

   Outline of Premises

EXHIBIT B

   Workletter Agreement

EXHIBIT C

   Signage

EXHIBIT C-1

   Laboratory Rules and Regulations

EXHIBIT C-2

   Rules and Regulations

EXHIBIT D

   SNDA

EXHIBIT E

   FF&E

RIDER 1

   Commencement Date Agreement

 

1.3

DEFINITIONS

For purposes hereof, in addition to terms defined elsewhere in this Lease, the following terms shall have the following meanings:

5858 HORTON LEASE: As defined in Section 2.1(c).

5980 HORTON REQUIRED EXPANSION SPACE: As defined in Section 2.1(c).

AFFILIATE: Any corporation or other business entity that is currently owned or controlled by, owns or controls, or is under common ownership or control with Tenant or Landlord, as the case may be.

 

5


AMORTIZED TENANT IMPROVEMENT ALLOWANCE PAYMENTS: As defined in Section 1.1(18)(d).

BANKRUPTCY CODE: As defined in Section 11.3.

BSL-1/BSL-2 LAB COOLING IMPROVEMENT COSTS: As defined in Section 1.1(18).

BSL-1/BSL-2 LABS: As defined in Section 7.1(a).

BUILDING: The building located at the address specified in Section 1.1. The Building may include office, medical, laboratory, retail and other uses.

CABLE: As defined in Section 8.2.

CITY: The City of Emeryville, California.

COMMENCEMENT DATE: The date determined pursuant to Article 2, which date is anticipated to be the Projected Commencement Date specified in Section 1.1.

COMMENCEMENT DATE LETTER: As defined in Section 2.2(b).

COMMON AREAS: All areas of the Project made available by Landlord from time to time for the general common use or benefit of the tenants of the Building, and their employees and invitees, or the public, as such areas currently exist and as they may be changed from time to time.

DEFAULT: As defined in Section 11.1.

DEFAULT RATE: One (1) percentage point above the rate then most recently announced by Bank of America N.A. at its San Francisco main office as its base lending reference rate, from time to time announced, but in no event higher than the maximum rate permitted by Law.

EXPIRATION DATE: The date specified in Section 1.1.

FORCE MAJEURE: Any accident, casualty, act of God, war or civil commotion, strike or labor troubles, governmental moratorium or other governmental action (including, without limitation, the passing of any law, rule or regulation or inaction due to the incidence of disease or other illness that reaches outbreak, epidemic and/or pandemic proportions (including, without limitation, COVID-19), but only to the extent such law, rule or regulation actually prevents the occupancy of the Premises, conduct of business from the Premises, or the conduct of physical construction work within the Premises), or any other causes of any kind whatsoever beyond the reasonable control of Landlord or Tenant, as applicable, including without limitation riots, terrorism, governmental laws, regulations or restrictions, labor or materials shortages, water shortages, energy shortages or governmental preemption in connection with an act of God, a national emergency, or by reason of Law, or by reason of the conditions of supply and demand which have been or are affected by act of God, war or other emergency.

GREEN BUILDING STANDARDS: One or more of the following: the U.S. EPA’s Energy Star® Portfolio Manager, the Green Building Initiative’s Green Globes building rating system,

 

6


the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED®) building rating system, the ASHRAE Building Energy Quotient (BEQ), the Global Real Estate Sustainability Benchmark (GRESB), or other standard for high performance buildings adopted by Landlord with respect to the Building or the Project, as the same may be revised from time to time.

HAZARDOUS MATERIALS: As defined in Section 7.1(f).

HAZARDOUS MATERIALS LAWS: As defined in Section 7.1(f).

INDEMNITEES: Collectively, Landlord, any Mortgagee or ground lessor of the Property, the property manager and the leasing manager for the Property, and their respective partners, members, directors, officers, agents and employees.

LANDLORD WORK: The construction or installation of improvements to the Premises to be furnished by Landlord, if any, as specifically described in the Workletter or exhibits attached hereto.

LAWS OR LAW: All laws, ordinances, rules, regulations, other requirements, orders, rulings or decisions adopted or made by any governmental body, agency, department or judicial authority having jurisdiction over the Property, the Premises or Tenant’s activities at the Premises and any covenants, conditions or restrictions of record which affect the Property.

LEASE: This instrument and all exhibits and riders attached hereto, as may be amended from time to time.

LEASEHOLD IMPROVEMENTS: As defined in Section 12.1.

MONTHLY BASE RENT: The monthly base rent specified in Section 1.1.

MORTGAGEE: Any holder of a mortgage, deed of trust or other security instrument encumbering the Property.

NATIONAL HOLIDAYS: New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day and other holidays recognized by Landlord and the janitorial and other unions servicing the Building in accordance with their contracts.

OPERATING EXPENSES: All costs, expenses and disbursements of every kind and nature which Landlord shall pay or become obligated to pay in connection with the ownership, management, operation, maintenance, replacement and repair of the Building and the Property (provided that such costs, expenses and disbursements are consistent with those customarily charged by similar landlords of first class office/laboratory buildings in the Emeryville area), including, without limitation, property management fees; costs and expenses of any capital expenditure or improvement that is Landlord’s responsibility under this Lease, and if Landlord elects to amortize such costs and expenses over a period that Landlord may determine, such costs and expenses shall be together with interest thereon at a rate reasonably determined by Landlord; an equitable allocation of management office expenses (including, without limitation, office rent, supplies, equipment, salaries, wages, bonuses and other compensation relating to employees of Landlord or its agents engaged in the management, operation, repair, or maintenance of the

 

7


Building); and, if applicable, the cost of operating a fitness center and/or any conference centers that are available for use by Tenant, as reasonably determined by Landlord. Operating Expenses shall not include: (i) costs of alterations of the premises of tenants of the Project; (ii) costs of goods or services to the extent billed directly to other tenants of the Project, including the cost incurred by Landlord in performing work to or for a tenant of space in the Project (including Tenant) at such tenant’s cost and expense; (iii) depreciation charges; (iv) interest and principal payments on loans except for loans for, or imputed interest on, capital expenditures or improvements which Landlord may elect to amortize as specified above); (v) ground rental payments or master lease rental payments or other repayment of indebtedness or costs, fees or other expenses in connection with any financing or refinancing of all or any part of the Project; (vi) costs of leasing, including without limitation real estate brokerage and leasing commissions; (vii) legal and other professional fees and expenses, advertising and marketing fees and expenses; (viii) costs to the extent Landlord has been reimbursed, or receives a credit, or is otherwise compensated for the same by insurance proceeds, condemnation awards, third party warranties or other third parties (other than tenants’ reimbursement of Operating Expenses); (ix) expenses incurred in negotiating leases of tenants in the Project or enforcing lease obligations of tenants in the Project; (x) Landlord’s general corporate overhead; (xi) costs directly incurred in connection with a sale, financing, refinancing or transfer of all or any portion of the Project (except as provided for in the definition of Taxes, below) (xii) costs of any resurfacing or restriping of the parking areas; (xiii) cost of correcting defects in the initial design or construction of the Premises or the Project; (xiv) costs of correcting any noncompliance of the Project or any part thereof with applicable Laws in effect and being enforced as of the Commencement Date; (xv) any costs relating to abatement of Hazardous Materials which are attributable to Landlord’s acts or omission or that of a tenant of the Building, other than Tenant; (xvi) reserves of any kind, including, without limitation, those for anticipated future expenses; and (xvii) interest or penalties incurred as a result of Landlord’s failure to pay any bill as it shall become due. If any Operating Expense, though paid in one year, relates to more than one calendar year, at the option of Landlord such expense may be proportionately allocated among such related calendar years and shall be reflected as such in the Landlord’s Statement (as defined below). Operating Expenses for the Property that are not, in Landlord’s reasonable discretion, allocable solely to either the office, laboratory or retail portion of the Building shall be equitably allocated by Landlord between/amongst such uses. The above enumeration of services and facilities shall not be deemed to impose an obligation on Landlord to make available or provide such services or facilities except to the extent if any that Landlord has specifically agreed elsewhere in this Lease to make the same available or provide the same.

PREMISES: The space located in the Building at the Suite Number listed in Section 1.1 and depicted on Exhibit A attached hereto.

PROJECT or PROPERTY: The Project consists of the office and laboratory/research building with ground floor office and/or retail spaces located at the street address specified in Section 1.1, and associated surface and garage parking as designated by Landlord from time to time, landscaping and improvements, together with the Land, any associated interests in real property, and the personal property, fixtures, machinery, equipment, systems and apparatus located in or used in conjunction with any of the foregoing. The Project may also be referred to as the Property.

 

8


PROJECT’S SUSTAINABILITY PRACTICES: The operations and maintenance practices for the Building, whether incorporated into the Building’s Rules and Regulations, construction rules and regulations or separate written sustainability policies of Landlord with respect to the Building or the Project, as the same may be revised from time to time so long as such revisions do not materially and negatively impact Tenant’s use of the Premises, addressing, among other things: energy efficiency; energy measurement and reporting; water usage; recycling, composting, and waste management; indoor air quality; and chemical use.

PROJECTED COMMENCEMENT DATE: The date specified in Section 1.1.

REAL PROPERTY: The Property excluding any personal property.

REDUCED SECURITY DEPOSIT: The reduced amount of the Security Deposit, as specified in Section 1.1 and subject to Tenant compliance with the terms of Section 5(c).

RENT: Collectively, Monthly Base Rent, Rent Adjustments and Rent Adjustment Deposits, and all other charges, payments, late fees or other amounts required to be paid by Tenant under this Lease.

RENT ADJUSTMENT: Any amounts owed by Tenant for payment of Operating Expenses and/or Taxes. The Rent Adjustments shall be determined and paid as provided in Article 4.

RENT ADJUSTMENT DEPOSIT: An amount equal to Landlord’s estimate of the Rent Adjustment attributable to each month of the applicable calendar year (or partial calendar year) during the Term, as provided in Article 4.

RENTABLE AREA OF THE PREMISES: The amount of square footage set forth in Section 1.1, which amount may change from time to time due to Landlord’s remeasurement of the Premises or the Building, provided such change does not result in any change to the Monthly Base Rent set forth in Section 1.1 above.

REQUIRED EXTENSION TERM: The extension of the Initial Term, as defined in Section 2.1(c).

SECURITY DEPOSIT: The funds specified in Section 1.1, if any, deposited by Tenant with Landlord as security for Tenant’s performance of its obligations under this Lease.

STANDARD OPERATING HOURS: Monday through Friday from 8:00 A.M. to 6:00 P.M., excluding National Holidays.

SUBSTANTIALLY COMPLETE or SUBSTANTIAL COMPLETION: The completion of the Tenant Work except for minor insubstantial details of construction, decoration or mechanical adjustments which remain to be done.

TAXES: All federal, state and local governmental taxes, assessments, license fees and charges of every kind or nature, whether general, special, ordinary or extraordinary, which Landlord shall pay or become obligated to pay because of or in connection with the ownership, leasing, management, control, sale, transfer, or operation of the Property or any of its components

 

9


(including any personal property used in connection therewith) or Landlord’s business of owning and operating the Property, which may also include any rental, revenue, general gross receipts or similar taxes levied in lieu of or in addition to general real and/or personal property taxes. For purposes hereof, Taxes for any year shall be Taxes which are assessed for any period of such year, whether or not such Taxes are billed and payable in a subsequent calendar year. There shall be included in Taxes for any year the amount of all fees, costs and expenses (including reasonable attorneys’ fees) paid by Landlord during such year in seeking or obtaining any refund or reduction of Taxes. Taxes for any year shall be reduced by the net amount of any tax refund received by Landlord attributable to such year. If a special assessment payable in installments is levied against any part of the Property, Taxes for any year shall include only the installment of such assessment and any interest payable or paid during such year. Taxes shall be determined without reference to any abatement or exemption from or credit against Taxes applicable to all or part of the Property. Taxes shall not include any federal or state inheritance, general income, gift or estate taxes, except that if a change occurs in the method of taxation resulting in whole or in part in the substitution of any such taxes, or any other assessment, for any Taxes as above defined, such substituted taxes or assessments shall be included in the Taxes, with credit given to any payments already made by Tenant prior to the change or substitution. Taxes for the tax year in which the Term shall commence or expire shall be apportioned according to the number of days during which each party shall be in possession during such tax year. Tenant and Landlord acknowledge that Proposition 13 was adopted by the voters of the State of California in the June, 1978 election and that assessments, taxes, fees, levies and charges may be imposed by governmental agencies for such purposes as fire protection, street, sidewalk, road, utility construction and maintenance, refuse removal and for other governmental services which may formerly have been provided without charge to property owners or occupants. It is the intention of the parties that all new and increased assessments, taxes, fees, levies and charges due to any cause whatsoever are to be included within the definition of Taxes for purposes of this Lease.

TEMPORARY SPACE: The space located in the Building as described in Section 2.1(b).

TENANT ADDITIONS: Collectively, Landlord Work, Tenant Work and Tenant Alterations.

TENANT ALTERATIONS: Any alterations, improvements, additions, installations or construction in or to the Premises or any Building systems serving the Premises (excluding Landlord Work or Tenant Work); and any supplementary air-conditioning systems installed by Landlord or by Tenant at Landlord’s request pursuant to Section 6.1(b).

TENANT INDEMNITEE: As defined in Section 17.2(b).

TENANT PARTY OR TENANT PARTIES: As defined in Section 7.1(f)(1)(x).

TENANT WORK: All work installed or furnished to the Premises by Tenant, if any, pursuant to the Workletter.

TENANT’S SHARE: The percentage that represents the ratio of the Rentable Area of the Premises to the Rentable Area of the Building, as determined by Landlord from time to time, which is as of the date hereof twenty and 75/100ths percent (20.75%). Tenant acknowledges that the

 

10


Rentable Area of the Premises or Building may change from remeasurement or otherwise during the Term or as a result of Tenant leasing additional space within the Building. Notwithstanding anything herein to the contrary, Landlord may equitably adjust Tenant’s Share for all or part of any item of expense or cost reimbursable by Tenant that relates to a repair, replacement, or service that benefits only the Premises or only a portion of the Building and/or the Project or that varies with the occupancy of the Building and/or the Project.

TERM: The initial term of this Lease commencing on the Commencement Date and expiring on the Expiration Date, subject to the terms of Section 2.2(c), plus any extension of the initial term as may be extended by the Extended Term(s) or otherwise by agreement of Landlord and Tenant.

TERMINATION DATE: The Expiration Date or such earlier date as this Lease terminates or Tenant’s right to possession of the Premises terminates.

WORKLETTER: The Agreement regarding the manner of completion of Landlord Work and Tenant Work set forth on Exhibit B attached hereto.

ARTICLE 2

PREMISES, TERM, FAILURE TO GIVE POSSESSION, AND PARKING

 

2.1

LEASE OF PREMISES

(a)    Premises. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises for the Term and upon the terms, covenants and conditions provided in this Lease. The parties acknowledge and agree that the Rentable Area set forth in this Lease has been conclusively determined and is deemed final for the purposes of this Lease and that prior to the Commencement Date, Tenant had the right to cause its Architect (as defined below) to verify and confirm the Rentable Area of the Premises and/or the Building.

(b)    Temporary Space. Landlord and Tenant acknowledge and agree that Tenant currently occupies space in the Building consisting of approximately 3,358 square feet of Rentable Area located on ground floor of the Building and known as Suite 100 (the “Temporary Space”), pursuant to the terms of that certain Office Lease dated February 14, 2020 (as amended, the “Temporary Space Lease”). Landlord and Tenant agree that the term for the Temporary Space shall expire as of the day before the Commencement Date of this Lease (the “Temporary Space Expiration Date”), which date shall be confirmed pursuant to the terms of Section 2.2(b) below, and that Landlord and Tenant shall enter into a separate amendment to the Temporary Space Lease to reflect the revised Temporary Space Expiration Date.

(c)    Contraction Right.

(1)    Tenant shall have the one-time right to elect to reduce the size of the Premises (“Tenant’s Contraction Right”). Tenant must notify Landlord, in writing, of Tenant’s election to reduce the size of the Premises no later than nine (9) months following the Commencement Date (“Tenant’s Contraction Notice”) subject to Force Majeure delays during the first seven (7) months following the Commencement Date. In Tenant’s Contraction Notice, Tenant shall identify the approximate amount of Rentable Area of the original Premises that Tenant wishes

 

11


to relinquish, but in no event shall said portion of the Premises constitute greater than fifty percent (50%) of the Rentable Area of the original Premises as of the Commencement Date. The specific size and demising of the portion of space to be relinquished by Tenant shall be acceptable to Landlord in Landlord’s commercially-reasonable discretion in good faith cooperation with Tenant, it being reasonable for Landlord to consider, among other things, the layout of the multi-tenant corridor necessary to connect the two Building exit stairs, and the lease-ability of the portion of space being relinquished as an independent suite to third-party tenants. The portion of the original Premises to be so deleted from the Premises shall be referred to as the “Contraction Space”. Upon final determination of the Contraction Space pursuant to the above, Landlord shall promptly design and construct the necessary demising wall(s) and common area corridor pursuant to designs prepared by Landlord and reasonably approved by Tenant (the “Contraction Construction Work”). Tenant shall reimburse Landlord (as additional Rent under this Lease) for a portion of the cost of the Contraction Construction Work, which portion shall be equal to such cost, multiplied by the ratio of the Rentable Area of the Premises following deletion of the Contraction Space to the Rentable Area of the original Premises (the “Contraction Construction Cost Reimbursement”). To the extent any of the Tenant Improvement Allowance (as reduced pursuant to Section 2.1(c)(2) below) remains as of the date Landlord has determined the Contraction Construction Cost Reimbursement, Tenant may apply any unused portion of the Tenant Improvement Allowance towards the Contraction Construction Cost Reimbursement. Upon the later to occur of: (A) twelve (12) months following the Commencement Date and (B) full completion of Contraction Construction Work, the Contraction Space shall be deleted from the Premises and Monthly Base Rent, Tenant’s Share and the amount of the Tenant Improvement Allowance shall be adjusted proportionately to reflect the deduction of the Contraction Space from the Premises, and Landlord shall prepare an amendment (the “5980 Horton Contraction Amendment”) documenting same. Tenant shall execute and return the 5980 Contraction Amendment to Landlord within fifteen (15) days after mutual agreement to the terms thereof.

(2)    In the event Tenant elects Tenant’s Contraction Right, the amount of the Tenant Improvement Allowance shall be reduced proportionately (by an amount equal to the ratio of the Rentable Area of the Premises following deletion of the Contraction Space to the Rentable Area of the original Premises) to reflect the reduction in rentable square footage of the Premises.

(3)    In the event Tenant has elected Tenant’s Contraction Right, the range of amount of Required Expansion Space shall be fifty percent (50%) of the range applicable if Tenant has not elected Tenant’s Contraction Right, meaning that, in the event Tenant has elected Tenant’s Contraction Right, the text of Section 2.1(d)(1)(i) shall be deleted and replaced with: “not less than 10,000 and not more than 17,500 rentable square feet,”.

(d)    Required Expansion Space.

(1)    Assuming that Landlord or the Adjacent Building Landlord (as defined below), separately or together, elect (which election shall be in their sole and absolute discretion) to make available to Tenant space with the following characteristics: (i) not less than 20,000 and not more than 35,000 rentable square feet, (ii) comprised of no more than two (2) separate suites, (iii) located within either the Building or the building owned by Landlord’s affiliate (the “Adjacent Building Landlord”) at 5858 Horton Street (the “Adjacent Building”), or both, (iv) contiguous with (i.e., either adjacent to, above or below) the Premises or Tenant’s premises in the Adjacent

 

12


Building, and (v) available for Tenant’s occupancy not earlier than April 1, 2024, nor later than November 30, 2025 (the “Required Expansion Space”), then if or to the extent that the Required Expansion Space is located within the Building, and subject to Tenant’s election pursuant to Section 2.1(d)(2) below, Tenant hereby leases from Landlord and Landlord leases to Tenant such portion of the Required Expansion Space (the “5980 Horton Required Expansion Space”). Tenant also shall lease from the Adjacent Building Landlord, subject to Tenant’s election pursuant to Section 2.1(d)(2) below, such portion of the Required Expansion Space that is located in the Adjacent Building (the “5858 Horton Required Expansion Space”), upon the terms and conditions specified by the Adjacent Building Landlord. Landlord and Tenant acknowledge and agree that Tenant currently leases approximately 1,198 rentable square feet of space on the first floor of the Adjacent Building pursuant to that certain lease dated November 3, 2014, by and between Tenant, as tenant, and the Adjacent Building Landlord, as landlord (as amended, the “5858 Horton Lease”). The Term of this Lease with respect to the 5980 Horton Required Expansion Space shall commence effective as of the 5980 Horton Required Expansion Space Commencement Date (hereinafter defined).

(2)    If Landlord and/or Adjacent Landlord elect to make available the Required Expansion Space, then Landlord and/or the Adjacent Building Landlord may provide Tenant with notice of the availability of the Required Expansion Space (an “Availability Notice”) not earlier than March 1, 2024, nor later than October 31, 2025, which notice shall specify (i) the date which the 5980 Horton Required Expansion Space and/or the 5858 Required Expansion Space will be available for the purposes of performing initial alterations therein, as applicable; (ii) the Monthly Base Rent based on the Fair Market Rent (as defined in Section 2.2(d)(2) below); (iii) Tenant’s Share of Operating Expenses and Taxes as it pertains to the 5980 Horton Required Expansion Space and/or the 5858 Horton Required Expansion Space; and (iv) the terms (including the commencement and expiration dates) as applicable to the 5980 Horton Required Expansion Space, with the date Landlord delivers possession to Tenant of the 5980 Horton Required Expansion Space (if applicable) for the purpose of performing Tenant Work therein being referred to herein as the “5980 Horton Required Expansion Space Commencement Date” and/or the 5858 Horton Required Expansion Space, and Tenant shall have thirty (30) days from receipt of the Availability Notice to give Landlord and/or the Adjacent Building Landlord notice of Tenant’s election either to lease or to decline to lease the 5980 Horton Required Expansion Space and/or the 5858 Horton Required Expansion Space (the “Expansion Notice”); provided that Tenant may request, and shall be granted, a fifteen day (15) day extension to provide the Expansion Notice. If Tenant fails to deliver the Expansion Notice within the foregoing timeframe, Tenant shall be deemed to have elected not to lease the 5980 Horton Required Expansion Space and the 5858 Required Expansion Space. If Tenant elects to lease the 5980 Horton Required Expansion Space, the 5980 Horton Required Expansion Space shall be considered Premises subject to all the terms and conditions of this Lease, except that no allowances, credits, abatements or other concessions (if any) set forth in this Lease for the existing Premises or any other expansions shall apply to the 5980 Horton Required Expansion Space. The 5980 Horton Required Expansion Space shall be considered part of “the Premises” for all purposes under this Lease, and Tenant occupancy of the 5980 Horton Required Expansion Space shall be subject to all the terms and conditions of this Lease (including, but not limited to the indemnity and insurance provisions under Articles 16 and 17 of this Lease) except:

 

13


(i)    Monthly Base Rent. The Monthly Base Rent for the 5980 Horton Required Expansion Space shall be Fair Market Rent for the 5980 Horton Required Expansion Space as of the 5980 Horton Required Expansion Space Commencement Date determined in the manner set forth in Section 2.2(d)(3) below.

(ii)    Tenant’s Share of Operating Expenses and Taxes. As of the 5980 Horton Required Expansion Space Commencement Date, Tenant shall pay to Landlord Rent Adjustments and Rent Adjustment Deposits for the 5980 Horton Required Expansion Space in the same manner that Tenant pays Rent Adjustments and Rent Adjustment Deposits for the Premises as provided in Article 4 of this Lease.

(iii)    Condition of the 5980 Horton Required Expansion Space. Tenant shall accept the 5980 Horton Required Expansion Space in “as is” condition, subject to any maintenance or repair obligations of Landlord expressly set forth herein and except the Premises shall be delivered broom clean with all Building systems serving the 5980 Horton Required Expansion Space in good working order and with a certificate of decontamination for any laboratory space, and Tenant shall be responsible for all costs of moving its furniture, equipment and personal property into the 5980 Horton Required Expansion Space. Tenant shall be entitled to receive a market-level tenant improvement allowance, if any (and the Fair Market Rent shall be adjusted accordingly), but shall not be entitled to receive any improvements, allowances, abatement or other financial concession granted with respect to the Premises for the 5980 Horton Required Expansion Space. The amount of any such allowances, abatement or other financial concession as may be applicable to the 5980 Horton Required Expansion Space shall be determined as part of the determination of the Fair Market Rent for the 5980 Horton Required Expansion Space.

(iv)    Parking. As of the 5980 Horton Required Expansion Space Commencement Date, Tenant shall be entitled to the number of parking spaces specified in Section 1.1.

(v)    Lease Amendment. Within thirty (30) days of the 5980 Horton Required Expansion Space Commencement Date, Landlord shall prepare an amendment (the “5980 Horton Required Expansion Space Amendment”) adding the 5980 Horton Required Expansion Space to the Premises on the terms set forth in this Section 2.1(c). Tenant shall execute and return the 5980 Horton Required Expansion Space Amendment to Landlord within fifteen (15) days after receipt thereof, but Tenant’s lease of the 5980 Horton Required Expansion Space shall be fully effective whether or not the 5980 Horton Required Expansion Space Amendment is prepared and/or executed.

(3)    Landlord shall make commercially reasonable efforts to cause the Adjacent Building Landlord to lease the 5858 Horton Required Expansion Space to Tenant on substantially the terms set forth in Section 2.1(c)(2) above; provided, however, notwithstanding anything in this Lease to the contrary, in no event shall Landlord be liable for (i) any failure to timely provide an Availability Notice to Tenant, (ii) any failure of the Adjacent Building Landlord to timely provide an Availability Notice to Tenant, or (iii) the Adjacent Building Landlord’s failure to offer the 5858 Horton Required Expansion Space on substantially the terms set forth in Section 2.1(c)(2) above. In the event of subsection (i) or (ii) above occurring, Tenant’s sole remedy shall be the fact that the Initial Term shall not be extended by the Required Extension Term pursuant to Section 2.2(c) below.

 

14


2.2

TERM

(a)    Commencement Date. The “Commencement Date” shall be (i) the date on which Landlord has delivered possession of the Premises to Tenant in accordance with the terms and conditions of this Lease; or (ii) any earlier date upon which Tenant, with Landlord’s written permission, takes possession of any portion of the Premises to commence construction of the Tenant Work.

(b)    Commencement Date Agreement. Within thirty (30) days following the occurrence of the Commencement Date, Landlord and Tenant shall enter into an agreement (the form of which is attached hereto as Rider 1) confirming the Commencement Date, the Temporary Space Expiration Date and the Expiration Date (the “Commencement Date Agreement”). If Tenant fails to enter into the Commencement Date Agreement, then the Commencement Date, the Temporary Space Expiration Date and the Expiration Date shall be the dates designated by Landlord in such agreement.

(c)    Required Extension Term. If Landlord elects (which election shall be in Landlord’s sole and absolute discretion) to offer for lease the Required Expansion Space pursuant to Section 2.1(c) above (regardless of whether any portion of such Required Expansion Space is located within the Building), the Term of this Lease automatically shall be extended by thirty (30) months (the “Required Extension Term”), and the “Initial Term” shall mean the Initial Term specified in Section 1.1, as extended by the Required Extension Term. If Landlord does elect to offer for lease the Required Expansion space, the Required Extension Term applies even if Tenant does not elect to lease the Required Expansion Space offered by Landlord.

(d)    Options to Extend. Provided that (i) Tenant has not sublet any portion of the Premises without Landlord’s consent in violation of this Lease, (ii) the Premises have been expanded pursuant to the terms of Section 2.1(d) above, and (iii) at the time of exercise and at all times prior to the commencement of the Extended Term (as defined below), Tenant shall not be in Default under this Lease, the Term of this Lease shall be subject to two (2) extension options, each for an additional period of sixty (60) months (each, an “Extension Option” and collectively, the “Extension Options”), commencing as of the expiration of the then-current Term, and expiring on the date that is sixty (60) full calendar months thereafter (each, an “Extended Term”), exercisable as follows:

(1)    The Extension Options shall be upon the same material terms and conditions contained in this Lease, except that (i) the initial Monthly Base Rent for the Premises shall be equal to the greater of (A) the Fair Market Rent (as defined in Section 2.2(d)(2) below) for the Premises as of the first month of the Extension Option determined in the manner set forth in Section 2.2(d)(3) below, or (B) the Monthly Base Rent in effect as of the expiration of the then- current Term; and (ii) Tenant shall accept the Premises in an “as is” condition without any obligation of Landlord to repaint, remodel, repair, improve or alter the Premises unless required by the terms and conditions of this Lease, including without limitation any maintenance and repair obligations of Landlord under this Lease.

 

15


(2)    Tenant’s election to exercise an Extension Option must be given to Landlord in writing no less than 270 days and no more than 365 days prior to the expiration of the then-current Term (the “Extension Notice”). Within thirty (30) days of Landlord’s receipt of the Extension Notice, Landlord shall send Tenant written notice of Landlord’s determination of the Fair Market Rent for the Premises (the “Fair Market Rent Notice”). For purposes of this Section, the term “Fair Market Rent” shall mean the base rental rate, periodic rental rate adjustment and other charges and increases, if any, for space comparable in size, location and quality to the Premises under a primary lease (and not sublease) to new or renewing tenants, for a comparable term with a tenant improvement allowance, if applicable and taking into consideration such amenities as existing improvements, view, floor on which the Premises are situated and the like, situated in comparable buildings in Emeryville, California. Notwithstanding anything to the contrary contained herein, an Extension Option shall automatically terminate and be of no further force or effect, whether or not Tenant has timely exercised the applicable Extension Option, if a Default exists at the time of exercise of the applicable Extension Option or at the time of commencement of the applicable Extended Term.

(3)    If Tenant properly exercises an Extension Option, the Monthly Base Rent during the Extended Term shall be determined in the following manner. The Monthly Base Rent as of the commencement of the Extended Term shall be adjusted to an amount equal to the Fair Market Rent for the Premises as specified in the Fair Market Rent Notice, subject to Tenant’s right of arbitration as set forth below. If Tenant believes that the Fair Market Rent specified in the Fair Market Rent Notice exceeds the actual Fair Market Rent for the Premises as of the date of such notice, then Tenant shall so notify Landlord within fifteen (15) days of Tenant’s receipt of the Fair Market Rent Notice. If Tenant fails to so notify Landlord within such 15-day period, Landlord’s determination of the Fair Market Rent shall be final and binding upon the parties. If the parties are unable to agree upon the Fair Market Rent within ten (10) days after Landlord’s receipt of Tenant’s objection to the Fair Market Rent Notice, the amount of Monthly Base Rent as of the commencement of the Extended Term shall be determined as follows:

(i)    Within 20 days after the 10-day period has expired and the parties have failed to agree on the Fair Market Rent, Tenant, at its sole expense, shall obtain and deliver in writing to Landlord a determination of the Fair Market Rent for the Premises for a term equal to the Extended Term from a broker (“Tenant’s Broker”) licensed in the State of California and engaged in the office brokerage business in Emeryville, California, for at least the immediately preceding five (5) years. If Landlord accepts such determination, the Monthly Base Rent for the Extended Term shall be adjusted to an amount equal to the amount determined by Tenant’s Broker.

(ii)    If Landlord does not accept such determination, within 15 days after receipt of the determination of Tenant’s Broker, Landlord shall designate a broker (“Landlord’s Broker”) licensed in the State of California and engaged in the office brokerage business in Emeryville, California, for at least the immediately preceding five (5) years. Landlord’s Broker and Tenant’s Broker shall name a third broker, similarly qualified, within five (5) days after appointment of Landlord’s Broker. Landlord’s Broker and Tenant’s Broker shall each determine the Fair Market Rent for the Premises as of the commencement of the Extended Term for a term equal to the Extended Term within 15 days after the appointment of the third broker. The Monthly Base Rent payable by Tenant effective as of the commencement of the Extended Term shall be adjusted to an amount equal to the determination of Fair Market Rent made by either Landlord’s Broker or Tenant’s Broker that the third broker finds to be closer to the Fair Market Rent.

 

16


(iii)    Landlord shall pay the costs and fees of Landlord’s Broker in connection with any determination hereunder, and Tenant shall pay the costs and fees of Tenant’s Broker in connection with such determination. The costs and fees of any third broker shall be paid one-half by Landlord and one-half by Tenant.

(4)    If the amount of the Fair Market Rent is not known as of the commencement of the Extended Term, then Tenant shall continue to pay the Monthly Base Rent for the Premises in effect at the expiration of the then-current Term until the amount of the Fair Market Rent is determined. When such determination is made, Tenant shall pay any deficiency to Landlord upon demand. Notwithstanding any provision of this Section 2.2(d) to the contrary, in no event shall the Monthly Base Rent for the Premises payable during any Extended Term be less than such Monthly Base Rent in effect prior to the commencement of such Extended Term.

(5)    In connection with the extension of the Term pursuant to Tenant’s exercise of any Extension Option, the parties acknowledge and agree that neither Landlord nor Tenant shall be responsible for the payment to any real estate broker, salesperson or finder claiming to have represented Tenant or Landlord of any commission, finder’s fee or other compensation in connection with or as a consequence of Tenant’s exercise of any Extension Option.

(6)    Notwithstanding anything to the contrary contained herein, Tenant’s rights under this Section 2.2(d) are personal to the original Tenant executing this Lease and any Permitted Transferee to whom this Lease is assigned pursuant to Section 10.1(e) below (“Named Tenant”) and shall not be assigned or assignable, in whole or in part, to any third party. Any other assignment or other transfer of such rights by Named Tenant shall be void and of no force or effect. Without limiting the generality of the foregoing, no sublessee of the Premises shall be permitted to exercise the rights granted to Tenant under this Section 2.2(d).

 

2.3

FAILURE TO DELIVER POSSESSION

If the Premises are not delivered to Tenant by the Projected Commencement Date for any reason, Landlord shall not be liable for any claims, damages or liabilities by reason thereof, nor shall such delivery delay affect the validity of this Lease or the obligations of Tenant hereunder; provided, however, if Landlord is unable to so deliver the Premises within sixty (60) days of the Projected Commencement Date (the “Outside Delivery Date”), then Tenant may, at its option, by notice in writing (the “Termination Notice”) delivered to Landlord within five (5) days after the Outside Delivery Date, cancel this Lease, in which event Landlord and Tenant shall be discharged from all obligations hereunder, Landlord shall return to Tenant any prepaid rent, and both parties shall be released from all obligations under this Lease (excepting only those obligations, such as indemnification and defense obligations, which are expressly intended to survive the termination of this Lease). If the Termination Notice is not received by Landlord within said five (5) day period, Tenant’s right to cancel as to such period shall terminate. The remedy set forth above shall be Tenant’s sole remedy in the event of a delay in delivering possession of the Premises to Tenant. In no event shall Landlord be liable for special or consequential damages as a result of any such delay.

 

17


2.4    CONDITION OF PREMISES

Tenant shall be conclusively deemed to have accepted the Premises “AS IS” in the condition existing on the Commencement Date, subject to the terms and conditions of this Lease (including without limitation any repair and maintenance obligations of Landlord); provided, however, that Landlord represents that, to Landlord’s knowledge after due inquiry and investigation, the systems serving the Premises, the Building and the Project shall be in good order and repair as of the Commencement Date. The foregoing notwithstanding, Landlord shall not be deemed to have breached the obligations set forth in this Section 2.4 unless and until Landlord has failed to perform the required work within a reasonable period following written notice of the required work from Tenant. Should Tenant determine that there is any noncompliance with the foregoing representation and provide Landlord with a written notice thereof, Landlord shall promptly after receipt of written notice from Tenant setting forth with specificity the nature and extent of such noncompliance, rectify the same at Landlord’s expense, and using commercially reasonable efforts to minimize any disruption to the performance of the Tenant Work in the Premises; such noncompliance shall not, however, entitle Tenant to an abatement of rent or to terminate this Lease, or otherwise release Tenant from any of Tenant’s obligations under this Lease.

2.5    PARKING

During the Term, Tenant may use up to the number of spaces specified in Section 1.1 for parking at the standard prevailing monthly rates being charged from time to time by Landlord or its parking operator. In the event Tenant fails at any time to pay the full amount of such parking charges after thirty (30) days’ notice to Tenant, Tenant’s parking rights shall be reduced to the extent of Tenant’s failure to pay for any such parking. The locations and type of parking (including, without limitation, valet parking, if any) shall be reasonably designated by Landlord or Landlord’s parking operator from time to time but at all times in accordance with the terms and conditions of this Lease. Tenant acknowledges and agrees that the parking spaces serving the Project may include tandem or valet parking and a mixture of spaces for compact vehicles as well as full-size passenger automobiles, and that Tenant shall not use parking spaces for vehicles larger than the striped size of the parking spaces. All vehicles utilizing Tenant’s parking spaces shall prominently display identification stickers or other markers, and/or have passes or keycards for ingress and egress, as may be required and provided by Landlord or its parking operator from time to time. Tenant shall comply with any and all parking rules and regulations from time to time established by Landlord or Landlord’s parking operator, including a requirement that Tenant pay to Landlord or Landlord’s parking operator a charge for loss and replacement of passes, keycards, identification stickers or markers, and for any and all loss or other damage caused by persons or vehicles related to use of Tenant’s parking spaces. Tenant shall not allow any vehicles using Tenant’s parking spaces to be parked, loaded or unloaded except in accordance with this Section, including in the areas and in the manner designated by Landlord or its parking operator for such activities. If any vehicle is using the parking or loading areas contrary to any provision of this Section, Landlord or its parking operator shall have the right, in addition to all other rights and remedies of Landlord under this Lease, to remove or tow away the vehicle without prior notice to Tenant, and the cost thereof shall be paid to Landlord within ten (10) business days after notice from Landlord. Notwithstanding anything to the contrary contained in this Lease, Tenant shall not be obligated to pay for any parking spaces until Tenant advises Landlord it intends to commence use of said parking spaces.

 

18


ARTICLE 3

RENT

From and after the Commencement Date, Tenant shall pay to Landlord at the address specified in Section 1.1, or to such other persons, or at such other places designated by Landlord, without any prior demand therefor in immediately available funds and without any deduction or offset whatsoever, Rent, including Monthly Base Rent and Rent Adjustments in accordance with Article 4, during the Term. Monthly Base Rent shall be paid monthly in advance on or prior to the first day of each month of the Term, except that the first installment of Monthly Base Rent shall be paid by Tenant to Landlord concurrently with Tenant’s execution of this Lease. Monthly Base Rent shall be prorated for partial months within the Term. Tenant’s covenant to pay Rent shall be independent of every other covenant in this Lease except as otherwise expressly provided in this Lease.

ARTICLE 4

RENT ADJUSTMENTS AND PAYMENTS

4.1    RENT ADJUSTMENTS

(a)    From and after the Commencement Date, Tenant shall pay to Landlord Rent Adjustments with respect to each calendar year (or partial calendar year in the case of the year in which the Commencement Date and the Termination Date occur) as follows:

(1)    The Rent Adjustment Deposit representing Tenant’s Share of Operating Expenses for the applicable calendar year (or partial calendar year), monthly during the Term with the payment of Monthly Base Rent;

(2)    The Rent Adjustment Deposit representing Tenant’s Share of Taxes for the applicable calendar year (or partial calendar year), monthly during the Term with the payment of Monthly Base Rent; and

(3)    Any Rent Adjustments due in excess of the Rent Adjustment Deposits in accordance with Section 4.2. Rent Adjustments due from Tenant to Landlord for any calendar year (or partial calendar year) shall be Tenant’s Share of Operating Expenses for such calendar year (or partial calendar year) and Tenant’s Share of Taxes for such calendar year (or partial calendar year).

(b)    On or before the beginning of each calendar year or with Landlord’s Statement (as defined in Section 4.2 below), Landlord may estimate and notify Tenant in writing of its estimate of the amount of Operating Expenses and Taxes payable by Tenant for such calendar year. Prior to the first determination by Landlord of the amount of Operating Expenses and Taxes for the first calendar year, Landlord may estimate such amounts in the foregoing calculation. Landlord shall have the right from time to time during any calendar year to provide a new or revised estimate of Operating Expenses and/or Taxes and to notify Tenant in writing thereof, of corresponding adjustments in Tenant’s Rent Adjustment Deposit payable over the remainder of such year, and of

 

19


the amount or revised amount due allocable to months preceding such change. The last estimate by Landlord shall remain in effect as the applicable Rent Adjustment Deposit unless and until Landlord notifies Tenant in writing of a change, which notice may be given by Landlord from time to time during any calendar year throughout the Term.

(c)    In the event that the Property is not fully assessed for all or a portion of any calendar year (or partial calendar year) during the Term, then Taxes shall be adjusted to an amount which would have been payable in such calendar year (or partial calendar year) if the Property had been fully assessed. In the event any other tenant in the Building provides itself with a service of a type which Landlord would supply under this Lease without an additional or separate charge to Tenant, then Operating Expenses shall be deemed to include the cost Landlord would have incurred had Landlord provided such service to such other tenant. In addition, Landlord shall have the right, at its sole discretion, from time to time, to equitably allocate certain Operating Expenses among only certain tenants of the Project as to any expense or cost that relates to a repair, replacement or service that benefits only those tenants, and the Rent Adjustments shall reflect any such allocations.

4.2    STATEMENT OF LANDLORD

As soon as practical after the expiration of each calendar year, Landlord will furnish Tenant with a statement respecting the prior calendar year (“Landlord’s Statement”) showing the following:

(a)    Operating Expenses and Taxes for such calendar year;

(b)    The amount of Rent Adjustments due Landlord for the last calendar year, less credit for Rent Adjustment Deposits paid, if any; and

(c)    Any change in the Rent Adjustment Deposit due monthly in the current calendar year, including the amount or revised amount due for months preceding any such change pursuant to Landlord’s Statement.

Tenant shall pay to Landlord within ten (10) days after receipt of such statement any amounts for Rent Adjustments then due in accordance with Landlord’s Statement. Any amounts due from Landlord to Tenant pursuant to this Section shall be credited to the Rent Adjustment Deposit next coming due, or refunded to Tenant if the Term has already expired, provided that Tenant is not in monetary Default under this Lease. No interest or penalties shall accrue on any amounts that Landlord is obligated to credit or refund to Tenant by reason of this Section 4.2. Landlord’s failure to deliver Landlord’s Statement or to compute the amount of the Rent Adjustments shall not constitute a waiver by Landlord of its right to deliver such items nor constitute a waiver or release of Tenant’s obligations to pay such amounts. The Rent Adjustment Deposit shall be credited against Rent Adjustments due for the applicable calendar year (or partial calendar year). During the last complete calendar year or during any partial calendar year in which this Lease terminates, Landlord may include in the Rent Adjustment Deposit its estimate of Rent Adjustments which might not be finally determined until after the termination of this Lease. Tenant’s obligation to pay Rent Adjustments, and Landlord’s obligation to refund any overpayments of Rent Adjustments, survives the expiration or termination of this Lease.

 

20


4.3    BOOKS AND RECORDS

Landlord shall maintain books and records showing Operating Expenses and Taxes in accordance with sound accounting and management practices, consistently applied. Tenant or its representative (which representative shall be a certified public accountant licensed to do business in the state in which the Property is located and who shall not be paid on a contingency basis) shall have the right, for a period of sixty (60) days following the date upon which Landlord’s Statement is delivered to Tenant, to examine Landlord’s books and records with respect to the items in the foregoing statement of Operating Expenses and Taxes during normal business hours, upon written notice, delivered at least five (5) business days in advance. Tenant shall pay for all costs of such examination; provided, however, if the examination reveals an overcharge of five percent (5%) or more, then Landlord shall pay for all reasonable and actual third-party costs of such examination, up to a maximum amount of $10,000.00. If Tenant performs such examination, but does not object in writing to Landlord’s Statement within ninety (90) days after Tenant’s receipt thereof, specifying the nature of the item in dispute and the reasons therefor, then Landlord’s Statement shall be considered final and accepted by Tenant and Tenant shall be deemed to have waived its right to dispute Landlord’s Statement. If Tenant does dispute any Landlord’s Statement, Tenant shall deliver a copy of any such audit to Landlord at the time of notification of the dispute. If Tenant does not provide such notice of dispute and a copy of such audit to Landlord within such ninety (90) day period, it shall be deemed to have waived such right to dispute Landlord’s Statement. Any amount due to Landlord as shown on Landlord’s Statement, whether or not disputed by Tenant as provided herein shall be paid by Tenant when due as provided above, without prejudice to any such written exception. In no event shall Tenant be permitted to examine Landlord’s records or to dispute any statement of Operating Expenses and Taxes unless Tenant has paid and continues to pay all Rent when due. Upon resolution of any dispute with respect to Operating Expenses and Taxes, Tenant shall either pay Landlord any shortfall or Landlord shall credit Tenant with respect to any overages paid by Tenant. The records obtained by Tenant shall be treated as confidential and neither Tenant nor any of its representatives or agents shall disclose or discuss the information set forth in the audit to or with any other person or entity (the “Confidentiality Requirement”), excluding Tenant’s attorneys, accountants, financial advisors, employees and consultants and as may be required by Law.

4.4    TENANT OR LEASE SPECIFIC TAXES

In addition to Monthly Base Rent, Rent Adjustments, Rent Adjustment Deposits and other charges to be paid by Tenant, Tenant shall pay to Landlord, upon demand, any and all taxes payable by Landlord (other than federal or state inheritance, general income, gift or estate taxes) whether or not now customary or within the contemplation of the parties hereto: (a) upon, allocable to, or measured by the Rent payable hereunder, including any gross receipts tax or excise tax levied by any governmental or taxing body with respect to the receipt of such rent; or (b) upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion thereof; or (c) upon the measured value of Tenant’s personal property located in the Premises or in any storeroom or any other place in the Premises or the Property, or the areas used in connection with the operation of the Property, it being the intention of Landlord and Tenant that, to the extent possible, such personal property taxes shall be billed to and paid directly by Tenant; (d) resulting from any Landlord Work, Tenant Work, Tenant Alterations, or any other improvements to the Premises, whether title thereto is in

 

21


Landlord or Tenant; or (e) upon this transaction. Taxes or supplemental taxes paid by Tenant pursuant to this Section 4.4 shall not be included in any computation of Taxes payable pursuant to Sections 4.1 and 4.2, but standard property management fees shall apply to any such payments.

ARTICLE 5

SECURITY

(a)    Simultaneously with Tenant’s execution and delivery of this Lease to Landlord, Tenant shall pay Landlord in immediately available funds the cash amount of the Security Deposit for the full and faithful performance by Tenant of each and every term, provision, covenant, and condition of this Lease. If Tenant fails timely to perform any of the terms, provisions, covenants and conditions of this Lease or any other document executed by Tenant in connection with this Lease, then Landlord may use, apply, or retain the whole or any part of the Security Deposit for the payment of any Rent not paid when due, for the cost of repairing any damage, for the payment of any other sum which Landlord may expend or may be required to expend by reason of Tenant’s failure to perform, and otherwise for compensation of Landlord for any other loss or damage to Landlord occasioned by Tenant’s failure to perform, including, but not limited to, any loss of future Rent and any damage or deficiency in the reletting of the Premises (whether such loss, damages or deficiency accrue before or after summary proceedings or other reentry by Landlord) and the amount of the unpaid past Rent, future Rent loss, and all other losses, costs and damages, that Landlord would be entitled to recover if Landlord were to pursue recovery under Section 11.2(b) or (c) of this Lease or California Civil Code Section 1951.2 or 1951.4 (and any supplements, amendments, replacements and substitutions thereof and therefor from time to time). If Landlord so uses, applies or retains all or part of the Security Deposit, Tenant shall within five (5) business days after demand pay or deliver to Landlord in immediately available funds the sum necessary to replace the amount used, applied or retained. If Tenant has fully and faithfully performed and observed all of Tenant’s obligations under the terms, provisions, covenants and conditions of this Lease, the Security Deposit (except any amount retained for application by Landlord as provided herein) shall be returned to Tenant with thirty (30) days after the latest of: (i) the Expiration Date; (ii) the removal of Tenant from the Premises; or (iii) the surrender of the Premises by Tenant to Landlord in accordance with this Lease, or such longer time as may be permissible under Law; provided, however, in no event shall any such return be construed as an admission by Landlord that Tenant has performed all of its obligations hereunder.

(b)    The Security Deposit shall not be deemed an advance rent deposit or an advance payment of any kind, or a measure of Landlord’s damages with respect to Tenant’s failure to perform, nor shall any action or inaction of Landlord with respect to it or its use or application be a waiver of, or bar or defense to, enforcement of any right or remedy of Landlord. Landlord shall not be required to keep the Security Deposit separate from its general funds and shall not have any fiduciary duties or other duties (except as set forth in this Section) concerning the Security Deposit. Tenant shall not be entitled to any interest on the Security Deposit. In the event of any sale, lease or transfer of Landlord’s interest in the Building, Landlord shall have the right to transfer the Security Deposit, or balance thereof, to the transferee and any such transfer shall release Landlord from all liability for the return of the Security Deposit. Tenant thereafter shall look solely to such transferee for the return or payment of the Security Deposit. Tenant shall not assign or encumber or attempt to assign or encumber the Security Deposit or any interest in it and Landlord shall not be bound by any such assignment, encumbrance, attempted assignment or attempted encumbrance,

 

22


and regardless of one or more assignments of this Lease, Landlord may return the Security Deposit to the original Tenant without liability to any assignee. Tenant hereby waives any and all rights of Tenant under the provisions of Section 1950.7 of the California Civil Code, and any and all rights of Tenant under all provisions of Law, now or hereafter enacted, regarding security deposits.

(c)    Notwithstanding anything to the contrary contained herein, so long as Tenant is not then in Default under this Lease, and Tenant has provided written documentation that it has secured additional funding for its business in an amount of not less than Fifty Million Dollars ($50,000,000), Tenant may cause the amount of the Security Deposit to be reduced to the Reduced Security Deposit. If the Security Deposit is so reduced, all references to “Security Deposit” in this Lease thereafter shall mean the Reduced Security Deposit.

ARTICLE 6

SERVICES

6.1    LANDLORDS GENERAL SERVICES

(a)    Landlord shall furnish the following services the cost of which services shall be included in Operating Expenses or paid directly by Tenant to the utility or service provider:

(1)    heat, ventilation and air-conditioning (“HVAC”) in the Premises during Standard Operating Hours as necessary in Landlord’s reasonable judgment for the comfortable occupancy of the Premises under normal business office and laboratory operations, and outside of Standard Operating Hours, HVAC shall be set to minimum safe setback levels for laboratory operations, subject to compliance with all applicable voluntary and mandatory regulations and Laws;

(2)    tempered and cold water for normal and customary use in the Premises and in lavatories in common with other tenants from the regular supply of the Building;

(3)    customary cleaning and janitorial services in the Common Areas five (5) days per week, excluding National Holidays;

(4)    washing of the outside windows in the Premises weather permitting at intervals determined by Landlord; and

(5)    automatic passenger elevator service in common with other tenants of the Building. Freight elevator service, if any, will be subject to reasonable scheduling by Landlord.

(b)    Landlord shall provide a security program for the Building (but not individually for Tenant or the Premises), the cost of which program shall be an Operating Expense. Landlord shall not be liable in any manner to Tenant or any other Tenant Parties for any acts (including criminal acts) of others, or for any direct, indirect, or consequential damages, or any injury or damage to, or interference with, Tenant’s business, including, but not limited to, loss of profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use, or other loss or damage, bodily injury or death, related to any malfunction, circumvention or other failure of any security program, or for the failure of any security program to prevent bodily injury, death, or property damage, or loss, or to apprehend any person suspected of causing such injury, death, damage or loss.

 

23


(c)    So long as this Lease is in full force and effect and Tenant has paid all Rent then due, Landlord shall furnish to the Premises replacement lamps, bulbs, ballasts and starters used in any normal Building lighting installed in the Premises, except that if the replacement or repair of such items is a result of gross negligence of Tenant, its employees, servants, licensees, subtenants, or contractors, such cost shall be paid by Tenant within ten (10) days after notice from Landlord and shall not be included as part of Operating Expenses.

(d)    If Tenant uses heat generating machines or equipment in the Premises to an extent which adversely affects the temperature otherwise maintained by the air-cooling system or whenever the occupancy or electrical load adversely affects the temperature otherwise maintained by the air-cooling system based upon all other tenants of the building using reasonable loads and load demands, Landlord reserves the right to install or to require Tenant to install supplementary air-conditioning units in the Premises, but to the extent that any other tenant benefits from such installation, the cost to Tenant shall be reduced accordingly. Tenant shall bear all costs and expenses related to the installation, maintenance and operation of such units.

(e)    Tenant shall pay Landlord at reasonable rates fixed by Landlord for all tenants in the Building, charges for all water furnished to the Premises beyond that described in Section 6.1(a)(2), including the expenses of installation of a water line, meter and fixtures.

6.2    UTILITIES AND JANITORIAL SERVICES

All utility services used in the production of heating and cooling and air supply and exhaust from the central HVAC systems serving the Building and Premises, including, without limitation, electricity and gas, as well as water and sewer services, shall constitute Operating Expenses. All utility services used by Tenant within the Premises, including, without limitation, electricity and gas, shall be paid for by Tenant either through a separate charge or as part of Operating Expenses. Such charges shall be based upon Tenant’s usage, which usage: (a) as to electricity, other than overhead lighting, shall be measured by a separate meter or sub-meter to be installed as part of the Tenant Improvements, and paid by Tenant within 15 days after billing as additional Rent under this Lease; and (b) as to all other utilities, shall either be reasonably estimated by Landlord and paid by Tenant within 15 days after billing as additional Rent under this Lease or included in Operating Expenses. In addition, Tenant may provide its own janitorial services to the Premises, using a janitorial service reasonably acceptable to Landlord or shall make arrangements with Landlord for Landlord, through Landlord’s vendors, to perform such Premises cleaning services, and shall pay the costs thereof directly to Landlord. Notwithstanding any provision of this Lease to the contrary, Tenant shall not make any alterations or additions to the electric equipment or systems, in each instance, without the prior written approval of Landlord, which approval shall not be unreasonably withheld, conditioned or delayed so long as such alterations or additions (i) do not exceed the capacity of the wiring, feeders and risers and (ii) are in compliance with the City’s building code. Tenant’s use of electric current shall at no time exceed the capacity of the wiring, feeders and risers providing electric current to the Premises or the Building. The consent of Landlord to the installation of electric equipment shall not relieve Tenant from the obligation to limit usage of electricity to no more than such capacity.

 

24


6.3    ADDITIONAL AND AFTER HOUR SERVICES

At Tenant’s written request, Landlord shall furnish additional quantities of any of the services or utilities specified in Section 6.1, if Landlord can reasonably do so, on the terms set forth herein. For services or utilities requested by Tenant and furnished by Landlord, Tenant shall pay to Landlord as a charge therefor Landlord’s prevailing rates charged from time to time for such services and utilities, as additional Rent under this Lease. Without limiting the generality of the foregoing, for HVAC service outside of Standard Operating Hours, Landlord’s prevailing rate as of the date of this Lease includes a one (1) hour minimum per activation. If Tenant shall fail to make any such payment after thirty (30) days of notice of demand, Landlord may, upon notice to Tenant and in addition to Landlord’s other remedies under this Lease, discontinue any or all of such additional services.

6.4    TELEPHONE SERVICES

All telephone and communication connections which Tenant may desire shall be subject to Landlord’s prior written approval, not to be unreasonably withheld, conditioned or delayed, and the location of all Cables and the work in connection therewith shall be performed by contractors approved by Landlord and shall be subject to the direction of Landlord and in compliance with Landlord’s then current Building standards for Cable installation. Landlord reserves the right to reasonably designate and control the entity or entities providing Cable installation, removal, repair and maintenance in the Building and to restrict and control access to telephone cabinets or panels. In the event Landlord designates a particular vendor or vendors to provide such Cable installation, removal, repair and maintenance for the Building, Tenant agrees to abide by and participate in such program. Tenant shall be responsible for and shall pay, as additional Rent under this Lease, all costs incurred in connection with the installation of Cables in the Premises, including any hook-up, access and maintenance fees related to the installation of such Cables in the Premises and the commencement of service therein, and the maintenance thereafter of such Cables; and there shall be included in Operating Expenses for the Building all installation, removal, hook-up or maintenance costs incurred by Landlord in connection with Cables serving the Building which are not allocable to any individual users of such service but are allocable to the Building generally. If Tenant fails to maintain all Cables in the Premises and such failure affects or interferes with the operation or maintenance of any other Cables serving the Building, Landlord or any vendor hired by Landlord may (if Tenant does not commence to cure such failure within fifteen (15) days’ notice to Tenant) enter into and upon the Premises forthwith and perform such repairs, restorations or alterations as Landlord deems necessary in order to eliminate any such interference (and Landlord may recover from Tenant all of Landlord’s reasonable out-of-pocket costs in connection therewith). If required by Landlord, no later than the Termination Date Tenant shall remove, at Tenant’s cost, all Cables installed by Tenant for and during Tenant’s occupancy and surrender the installation in a condition previously approved by Landlord. Tenant agrees that neither Landlord nor any of its agents or employees shall be liable to Tenant, or any of Tenant’s employees, agents, customers or invitees or anyone claiming through, by or under Tenant, for any damages, injuries, losses, expenses, claims or causes of action because of any interruption, diminution, delay or discontinuance at any time for any reason in the furnishing of any telephone or other communication service to the Premises and the Building.

 

25


6.5    DELAYS IN FURNISHING SERVICES

Tenant agrees that Landlord shall not be in breach of this Lease nor be liable to Tenant for damages or otherwise, for any failure to furnish, or a delay in furnishing, or a change in the quantity or character of any service when such failure, delay or change is occasioned, in whole or in part, by repairs, improvements or mechanical breakdowns, by the act or default of Tenant or other parties or by an event of Force Majeure. No such failure, delay or change shall be deemed to be an eviction or disturbance of Tenant’s use and possession of the Premises, or relieve Tenant from paying Rent or from performing any other obligations of Tenant under this Lease, without any deduction or offset. Failure to any extent to make available, or any slowdown, stoppage, or interruption of, the specified utility services resulting from any cause, including changes in service provider or Landlord’s compliance with any voluntary or similar governmental or business guidelines now or hereafter published or any requirements now or hereafter established by any governmental agency, board, or bureau having jurisdiction over the operation of the Property, shall not render Landlord liable in any respect for damages to either persons, property, or business, nor be construed as an eviction of Tenant or work an abatement of Rent, nor relieve Tenant of Tenant’s obligations for fulfillment of any covenant or agreement hereof. Should any equipment or machinery furnished by Landlord break down or for any cause cease to function properly, Landlord shall use reasonable diligence to repair same promptly, but Tenant shall have no claim for abatement of Rent or damages on account of any interruption of service occasioned thereby or resulting therefrom. Tenant hereby waives any benefits of any applicable existing or future Law, including the provisions of California Civil Code section 1932(1), permitting the termination of this Lease due to such interruption, failure or inability.

6.6    CHOICE OF SERVICE PROVIDER

Tenant acknowledges that Landlord may, at Landlord’s sole option, to the extent permitted by applicable law, elect to change, from time to time, the company or companies which provide services (including electrical service, gas service, water, telephone and technical services) to the Building, the Premises and/or its occupants. Notwithstanding anything to the contrary set forth in this Lease, Tenant acknowledges that Landlord has not and does not make any representations or warranties concerning the identity or identities of the company or companies which provide services to the Building and the Premises or its occupants, and Tenant acknowledges that the choice of service providers and matters concerning the engagement and termination thereof shall be solely that of Landlord. The foregoing provision is not intended to modify, amend, change or otherwise derogate any provision of this Lease concerning the nature or type of service to be provided or any specific information concerning the amount thereof to be provided. Tenant agrees to cooperate with Landlord and each of its service providers in connection with any change in service or provider.

6.7    SIGNAGE

Initial Building standard signage for Tenant will be installed by Landlord in the directory in the main lobby of the Building and, in the case of any multi-tenant floor, in the listing of tenants in the elevator lobby for the floor on which the Premises is located and at Tenant’s main entry door to the Premises, all at Tenant’s sole cost and expense. Tenant has the right to update and modify its signage from time to time in accordance with Tenant’s standard corporate signage and/or logo

 

26


and Landlord’s consent shall not be required in the event of a change in the name, logo or color of such signage consistent with its corporate standard (provided that the size, location and quantity of existing signage is not altered). Landlord shall, in good faith, but at no cost, cooperate with Tenant in obtaining any permits and licenses required by Tenant. By execution of this Lease, Landlord shall be deemed to have approved the signage as shown on Exhibit C attached hereto.

ARTICLE 7

USE OF PREMISES; LANDLORD’S ACCESS RIGHTS

7.1    USE OF PREMISES

(a)    Tenant shall occupy and use the Premises only for the uses specified in Section 1.1 to conduct Tenant’s business. Tenant’s use of the Premises for research and development laboratory use shall be expressly contingent upon Tenant modifying portions of the Premises to biosafety level 1 or biosafety level 2 laboratory space (the “BSL-1/BSL-2 Labs”), which modifications must be performed in accordance either with the Workletter or Article 9 below. Tenant shall not occupy or use the Premises (or permit the use or occupancy of the Premises) for any purpose or in any manner which: (1) is unlawful or in violation of any Law or Hazardous Materials Law; (2) may be dangerous to persons or property or which may substantially increase the cost of, or invalidate, any policy of insurance carried on the Building or covering its operations; (3) is contrary to or prohibited by the terms and conditions of this Lease or the rules of the Building set forth in Article 18; (4) would create or continue a nuisance; or (5) in any manner that will cause the Building or any part thereof not to conform with the Project’s Sustainability Practices or the certification of the Building’s core and shell issued pursuant to the applicable Green Building Standards.

(b)    Landlord shall provide Tenant with access card keys the cost of which shall be paid by Tenant within ten (10) days after Landlord’s demand therefor, and Tenant shall place a deposit for such cards with Landlord to cover lost cards or cards which are not returned at the end of the Term.

(c)    Landlord and Tenant acknowledge that the Americans With Disabilities Act of 1990 (42 U.S.C. §12101 et seq.) and regulations and guidelines promulgated thereunder, as all of the same may be amended and supplemented from time to time (collectively referred to herein as the “ADA”) establish requirements for business operations, accessibility and barrier removal, and that such requirements may or may not apply to the Premises, the Building and the Project depending on, among other things: (1) whether Tenant’s business is deemed a “public accommodation” or “commercial facility”, (2) whether such requirements are “readily achievable”, and (3) whether a given alteration affects a “primary function area” or triggers “path of travel” requirements. The parties hereby agree that: (i) Landlord shall be responsible for ADA Title III compliance in the Common Areas and in the Premises to the extent required as of the Commencement Date, except as provided below, (ii) Tenant shall be responsible for ADA Title III compliance in the Premises, including any Leasehold Improvements or other work to be performed in the Premises under or in connection with this Lease, (iii) Landlord may perform, or require that Tenant perform, and Tenant shall be responsible for the cost of, ADA Title III “path of travel” requirements triggered by Tenant Additions in the Premises, and (iv) Landlord may perform, or require Tenant to perform, and Tenant shall be responsible for the cost of, ADA Title

 

27


III compliance in the Common Areas necessitated by the Building being deemed to be a “public accommodation” instead of a “commercial facility” as a result of Tenant’s use of the Premises. Tenant shall be solely responsible for requirements under Title I of the ADA relating to Tenant’s employees. Notwithstanding the foregoing to the contrary contained in this Lease, (A) Landlord shall be responsible for the cost of any ADA upgrades required to the restrooms located within the Premises, to the extent such upgrades are not required by governmental authorities due to the Tenant Work and (B) Tenant’s obligations under this Section shall only apply to ADA Title III requirements actually triggered by Tenant Alterations in the Premises that require a building permit.

(d)    Landlord and Tenant agree to cooperate and use commercially reasonable efforts to participate in traffic management programs generally applicable to businesses located in or about the area and Tenant shall encourage and support van, shuttle service, and carpooling by, and staggered and flexible working hours for, its office workers and service employees to the extent reasonably permitted by the requirements of Tenant’s business. Neither this Section or any other provision of this Lease is intended to or shall create any rights or benefits in any other person, firm, company, governmental entity or the public.

(e)    Tenant agrees to cooperate with Landlord and to comply with any and all guidelines or controls concerning energy management and usage disclosure imposed upon Landlord by federal or state governmental organizations or by any energy conservation association to which Landlord is a party or which is applicable to the Building, including, without limitation, the requirements of California’s Nonresidential Building Energy Use Disclosure Program, as more particularly specified in California Public Resources Code Sections 25402.10 et seq. and regulations adopted pursuant thereto. Further, Tenant hereby authorizes (and agrees that Landlord shall have the authority to authorize) any electric or gas utility company providing service to the Building to disclose from time to time so much of the data collected and maintained by it regarding Tenant’s energy consumption data as may be necessary to cause the Building to participate in the ENERGY STAR® Portfolio Manager system and similar programs; and Tenant further authorizes Landlord to disclose information concerning energy use by Tenant, either individually or in combination with the energy use of other tenants, as applicable as Landlord determines to be necessary to comply with applicable Laws pertaining to the Building or Landlord’s ownership thereof.

(f)    Hazardous Materials.

(1)    Definitions. The following terms shall have the following meanings for purposes of this Lease:

(i)    “Biohazardous Materials” means any and all substances and materials defined or referred to as “medical waste,” “biological waste,” “biohazardous waste,” “biohazardous material” or any other term of similar import under any Hazardous Materials Laws, including (but not limited to) California Health & Safety Code Sections 25105 et seq., and any regulations promulgated thereunder, as amended from time to time.

(ii)    “Chemical Control Area Plan” means that certain plan for the use and storage of Hazardous Materials in the Building created by Landlord and approved by the City.

 

28


(iii)    “Environmental Condition” means the Release of any Hazardous Materials in, over, on, under, through, from or about the Project (including, but not limited to, the Premises).

(iv)    “Environmental Damages” means all claims, suits, judgments, damages, losses, penalties, fines, liabilities, encumbrances, liens, costs and expenses of whatever kind or nature, contingent or otherwise, matured or unmatured, foreseeable or unforeseeable, arising out of or in connection with any Environmental Condition, including, to the extent arising out of an Environmental Condition, without limitation: (A) damages for personal injury, or for injury or damage to the Project or natural resources occurring on or off the Project, including without limitation (1) any claims brought by or on behalf of any person, (2) any loss of, lost use of, damage to or diminution in value of any Project or natural resource, and (3) costs of any investigation, remediation, removal, abatement, containment, closure, restoration or monitoring work required by any federal, state or local governmental agency or political subdivision, or otherwise reasonably necessary to protect the public health or safety, whether on or off the Project; (B) reasonable fees incurred for the services of attorneys, consultants, contractors, experts and laboratories in connection with the preparation of any feasibility studies, investigations or reports or the performance of any work described above; (C) any liability to any third person or governmental agency to indemnify such person or agency for costs expended or liabilities incurred in connection with any items described in clause (A) or (B) above; (D) any fair market or fair market rental value of the Project; and (E) the amount of any penalties, damages or costs a party is required to pay or incur in excess of that which the party otherwise would reasonably have expected to pay or incur absent the existence of the applicable Environmental Condition.

(v)    “Handling” or “Handles”, when used with reference to any substance or material, includes (but is not limited to) any receipt, storage, use, generation, Release, transportation, treatment or disposal of such substance or material.

(vi)    “Hazardous Materials” means any and all chemical, explosive, biohazardous, radioactive or otherwise toxic or hazardous materials or hazardous wastes, including without limitation any asbestos-containing materials, PCB’s, CFCs, petroleum and derivatives thereof, Radioactive Materials, Biohazardous Materials, Hazardous Wastes, any other substances defined or listed as or meeting the characteristics of a hazardous substance, hazardous material, Hazardous Waste, toxic substance, toxic waste, biohazardous material, biohazardous waste, biological waste, medical waste, radiation, radioactive substance, radioactive waste, or other similar term, as applicable, under any law, statute, ordinance, code, rule, regulation, directive, order, condition or other written requirement enacted, promulgated or issued by any public officer or governmental or quasi-governmental authority, whether now in force or hereafter in force at any time or from time to time to protect the environment or human health, and/or any mixed materials, substances or wastes containing more than one of the foregoing categories of materials, substances or wastes.

(vii)    “Hazardous Materials Laws” means, collectively, (A) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. Sections 9601-9657, (B) the Hazardous Materials Transportation Act of 1975, 49 U.S.C. Sections 1801-1812, (C) the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Sections 6901-6987 (together with any amendments thereto, any regulations thereunder and any

 

29


amendments to any such regulations as in effect from time to time, “RCRA”), (D) the California Carpenter-Presley-Tanner Hazardous Substance Account Act, California Health & Safety Code Sections 25300 et seq., (E) the Hazardous Materials Release Response Plans and Inventory Act, California Health & Safety Code Sections 25500 et seq., (F) the California Hazardous Waste Control Law, California Health & Safety Code Sections 25100 et seq. (together with any amendments thereto, any regulations thereunder and any amendments to any such regulations as in effect from time to time, the “CHWCL”), (G) California Health & Safety Code Sections 25015-25027.8, (H) any amendments to or successor statutes to any of the foregoing, as adopted or enacted from time to time, (I) any regulations or amendments thereto promulgated pursuant to any of the foregoing from time to time, (J) any Laws relating to Biohazardous Materials, including (but not limited to) any regulations or requirements with respect to the shipping, use, decontamination and disposal thereof, and (K) any other Law now or at any time hereafter in effect regulating, relating to or imposing liability or standards of conduct concerning any Hazardous Materials, including (but not limited to) any requirements or conditions imposed pursuant to the terms of any orders, permits, licenses, registrations or operating plans issued or approved by any governmental or quasi-governmental authority from time to time either on a Project-wide basis or in connection with any Handling of Hazardous Materials in, on or about the Premises or the Project.

(viii)    “Hazardous Wastes” means (A) any waste listed as or meeting the identified characteristics of a “hazardous waste” or terms of similar import under RCRA, (B) any waste meeting the identified characteristics of a “hazardous waste”, “extremely hazardous waste” or “restricted hazardous waste” under the CHWCL, and/or (C) any and all other substances and materials defined or referred to as a “hazardous waste” or other term of similar import under any Hazardous Materials Laws.

(ix)    “Landlord’s Contamination” means any Hazardous Materials which exist in, on, under or in the vicinity of the Project as of the date of this Lease or which migrate onto or beneath the Project after termination of this Lease. Tenant shall not be required to pay any costs with respect to the remediation or abatement of Landlord’s Contamination.

(x)    “Radioactive Materials” means (A) any and all substances and materials the Handling of which requires an approval, consent, permit or license from the Nuclear Regulatory Commission, (B) any and all substances and materials the Handling of which requires a Radioactive Material License or other similar approval, consent, permit or license from the State of California, and (C) any and all other substances and materials defined or referred to as “radiation,” a “radioactive material” or “radioactive waste,” or any other term of similar import under any Hazardous Materials Laws, including (but not limited to) Title 26, California Code of Regulations Section 17-30100, and any statutes, regulations or other laws administered, enforced or promulgated by the Nuclear Regulatory Commission.

(xi)    “Release” means any accidental or intentional spilling, leaking, pumping, pouring, emitting, discharging, injecting, escaping, leaching, migrating, dumping or disposing into the air, land, surface water, groundwater or the environment (including without limitation the abandonment or discarding of receptacles containing any Hazardous Materials).

 

30


(xii)    “Tenant’s Contamination” means any Hazardous Material Release on or about the Property by Tenant and/or any agents, employees, contractors, vendors, suppliers, licensees, subtenants, and invitees of Tenant (individually, a “Tenant Party” and collectively, “Tenant Parties”).

(2)    Handling of Hazardous Materials. The parties acknowledge that Tenant wishes and intends to use all or a portion of the Premises as a bio-pharmaceutical research and development facility in conformance with the conduct by Tenant of its business in accordance with the use specified in Section 1.1, that such use, as conducted or proposed to be conducted by Tenant, would customarily include the Handling of Hazardous Materials, and that Tenant shall therefore be permitted to engage in the Handling in the Premises of necessary and reasonable quantities of Hazardous Materials customarily used in or incidental to the operation of a bio-pharmaceutical research, development preparation and/or dispensing facility in conformance with business operations of Tenant in the manner conducted or proposed to be conducted by Tenant hereunder (“Permitted Hazardous Materials”), provided that the Handling of such Permitted Hazardous Materials by all Tenant Parties shall at all times comply with and be subject to all provisions of this Lease and all Laws, including all Hazardous Materials Laws, and with Landlord’s Chemical Control Area Plan for the Building. Without limiting the generality of the foregoing, Tenant shall comply at all times with all Hazardous Materials Laws applicable to any aspect of Tenant’s use of the Premises and the Project and of Tenant’s operations and activities in, on and about the Premises and the Project, and shall ensure at all times that Tenant’s Handling of Hazardous Materials in, on and about the Premises does not violate (x) the terms of any governmental licenses or permits applicable to the Building (including, but not limited to, the Building Discharge Permit as defined below) or Premises or to Tenant’s Handling of any Hazardous Materials therein, or (y) any applicable requirements or restrictions relating to the occupancy classification of the Building and the Premises. Notwithstanding anything to the contrary contained in this Lease, Tenant’s obligations under this Section shall not include any remediation and/or indemnification arising from any grossly negligent acts by Landlord, its employees or agents.

(3)    Disposition or Emission of Hazardous Materials. Tenant shall not Release or dispose of any Hazardous Materials, except to the extent authorized by permit, at the Premises or on the Project, but instead shall arrange for off-site disposal, under Tenant’s own name and EPA waste generator number (or other similar identifying information issued or prescribed by any other governmental authority with respect to Radioactive Materials, Biohazardous Materials or any other Hazardous Materials) and at Tenant’s sole expense, in compliance with all applicable Hazardous Materials Laws, with the Laboratory Rules and Regulations (defined below) and with all other applicable Laws and regulatory requirements.

(4)    Information Regarding Hazardous Materials. Tenant shall maintain and make available to Landlord the following information and/or documentation upon demand no more than once a year unless Tenant is in violation of a Hazardous Materials Law:

(i)    An inventory of all Hazardous Materials that Tenant receives, uses, handles, generates, transports, stores, treats or disposes of from time to time, or at the time of preparation of such inventory proposes or expects to use, handle, generate, transport, store, treat or dispose of from time to time, in connection with its operations at the Premises. Such inventory shall include, but shall separately identify to the extent possible, any Hazardous Wastes,

 

31


Biohazardous Materials and Radioactive Materials covered by the foregoing description. If such inventory includes any Biohazardous Materials, Tenant shall also disclose in writing to Landlord the Biosafety Level designation associated with the use of such materials.

(ii)    Copies of all then existing permits, licenses, registrations and other similar documents issued by any governmental or quasi-governmental authority that authorize any Handling of Hazardous Materials in, on or about the Premises or the Project by any Tenant Party.

(iii)    All Material Safety Data Sheets (“MSDSs”), if any, required to be completed with respect to operations of Tenant at the Premises from time to time in accordance with Title 26, California Code of Regulations Section 8-5194 or 42 U.S.C. Section 11021, or any amendments thereto, and any Hazardous Materials Inventory Sheets that detail the MSDSs.

(iv)    All hazardous waste manifests (as defined in Title 26, California Code of Regulations Section 22-66481), if any, that Tenant is required to complete from time to time in connection with its operations at the Premises.

(v)    A copy of any “Hazardous Materials Business Plan” required from time to time with respect to Tenant’s operations at the Premises pursuant to California Health & Safety Code Sections 25500 et seq., and any regulations promulgated thereunder, as amended from time to time, or in connection with Tenant’s application for a business license from the City. If applicable law does not require Tenant to prepare a Hazardous Materials Business Plan, Tenant shall furnish to Landlord at the times and in the manner set forth above the information that would customarily be contained in a Hazardous Materials Business Plan, including (but not limited to) information regarding Tenant’s Hazardous Materials inventories. The parties acknowledge that a Hazardous Materials Business Plan would ordinarily include an emergency response plan, and that regardless of whether applicable Law requires Tenant or other tenants in the Building to prepare Hazardous Materials Business Plans, Landlord in its discretion may elect to prepare a coordinated emergency response plan for the entire Building and/or for multiple Buildings on the Project (if and to the extent applicable).

(vi)    Any “Contingency Plans and Emergency Procedures” required of Tenant from time to time, in connection with its operations at the Premises, pursuant to applicable Law, Title 26, California Code of Regulations Sections 22-67140 et seq., and any amendments thereto, and any “Training Programs and Records” required under Title 26, California Code of Regulations Section 22-66493, and any amendments thereto from time to time. Landlord in its discretion may elect to prepare a Contingency Plan and Emergency Procedures for the entire Building and/or for multiple buildings on the Project, in which event, if applicable law does not require Tenant to prepare a Contingency Plan and Emergency Procedures for its operations at the Premises, Tenant shall furnish to Landlord at the times and in the manner set forth above the information that would customarily be contained in a Contingency Plan and Emergency Procedures.

(vii)    Copies of any biennial or other periodic reports furnished or required to be furnished to the California Department of Health Services from time to time, under applicable law, pursuant to Title 26, California Code of Regulations Section 22-66493 and any amendments thereto, relating to any Hazardous Materials.

 

32


(viii)    Copies of any industrial wastewater discharge permits issued to or held by Tenant from time to time in connection with its operations at the Premises (the parties presently anticipate, however, that because of the existence of the Building Discharge Permit in Landlord’s name as described above. Tenant will not be required to maintain a separate, individual discharge permit).

(ix)    Copies of any other lists, reports, studies, or inventories of Hazardous Materials or of any subcategories of materials included in Hazardous Materials that Tenant is otherwise required to prepare and file from time to time with any governmental or quasi-governmental authority in connection with Tenant’s operations at the Premises, including (but not limited to) reports filed by Tenant with the federal Food & Drug Administration or any other regulatory authorities primarily in connection with the presence (or lack thereof) of any “select agents” or other Biohazardous Materials on the Premises, together with proof of filing thereof.

(x)    Any other information reasonably requested by Landlord in writing from time to time in connection with (A) Landlord’s monitoring (in Landlord’s reasonable discretion) and enforcement of Tenant’s obligations under this Section and of compliance with applicable Laws in connection with any Handling or Release of Hazardous Materials in the Premises or Building or on or about the Project by any Tenant Party, (B) any inspections or enforcement actions by any governmental authority pursuant to any Hazardous Materials Laws or any other Laws relating to the presence or Handling of Hazardous Materials in the Premises or Building or on or about the Project by any Tenant Party, and/or (C) Landlord’s preparation (in Landlord’s discretion) and enforcement of any reasonable rules and procedures relating to the presence or Handling by Tenant or any Tenant Party of Hazardous Materials in the Premises or Building or on or about the Project, including (but not limited to) any contingency plans or emergency response plans as described above. Except as otherwise required by Law, Landlord shall keep confidential any information supplied to Landlord by Tenant pursuant to the foregoing, provided, however, that the foregoing shall not apply to any information filed with any governmental authority or available to the public at large. Landlord may provide such information to its lenders, consultants or investors provided such entities agree to keep such information confidential.

(5)    Indemnification; Notice of Release. Tenant shall be responsible for and shall indemnify, defend and hold Landlord harmless from and against all Environmental Damages to the extent arising out of or otherwise relating to, (i) any Handling of Hazardous Materials by any Tenant Party in, on or about the Premises or the Project in violation of this Section, (ii) any breach of Tenant’s obligations under this Section or of any Hazardous Materials Laws by any Tenant Party, or (iii) the existence of any Tenant’s Contamination in, on or about the Premises or the Project to the extent caused by any Tenant Party, including without limitation any removal, cleanup or restoration work and materials necessary to return the Project or any improvements of whatever nature located on the Project to the condition existing prior to the Handling of Hazardous Materials in, on or about the Premises or the Project by any Tenant Party. In the event of any Tenant’s Contamination in, on or about the Premises or any other portion of the Project or any adjacent lands, Tenant shall promptly remedy the problem in accordance with all applicable Hazardous Materials Laws, shall give Landlord oral notice of any such non-standard or non-customary Release promptly after Tenant becomes aware of such Release, followed by written

 

33


notice to Landlord within five (5) days after Tenant becomes aware of such Release, and shall furnish Landlord with concurrent copies of any and all notices, reports and other written materials filed by any Tenant Party with any governmental authority in connection with such Release. Tenant shall have no obligation to remedy any Hazardous Materials contamination which was not caused or released by a Tenant Party.

(6)    Governmental Notices. Tenant shall promptly provide Landlord with copies of all notices received by Tenant relating to any actual or alleged presence or Handling by any Tenant Party of Hazardous Materials in, on or about the Premises or any other portion of the Project, including, without limitation, any notice of violation, notice of responsibility or demand for action from any federal, state or local governmental authority or official in connection with any actual or alleged presence or Handling by any Tenant Party of Hazardous Materials in or about the Premises or any other portion of the Project.

(7)    Inspection by Landlord. In addition to, and not in limitation of, Landlord’s rights under this Lease, upon reasonable prior request by Landlord, Tenant shall grant Landlord and its consultants, as well as any governmental authorities having jurisdiction over the Premises or over any aspect of Tenant’s use thereof, reasonable access to the Premises at reasonable times to inspect Tenant’s Handling of Hazardous Materials in, on and about the Premises, and Landlord shall not thereby incur any liability to Tenant or be deemed guilty of any disturbance of Tenant’s use or possession of the Premises by reason of such entry; provided, however, that Landlord shall use reasonable efforts to minimize interference with Tenant’s use of the Premises caused by such entry. Landlord shall comply with any security precaution reasonably imposed by Tenant during any entry onto the Premises and shall minimize to the extent reasonably possible any interference with Tenant’s use of the Premises caused by such entry. Notwithstanding Landlord’s rights of inspection and review of documents, materials and physical conditions under this Section with respect to Tenant’s Handling of Hazardous Materials, Landlord shall have no duty or obligation to perform any such inspection or review or to monitor in any way any documents, materials, physical conditions or compliance with Laws in connection with Tenant’s Handling of Hazardous Materials, and no third Party shall be entitled to rely on Landlord to conduct any such inspection, review or monitoring by reason of the provisions of this Section.

(8)    Monitoring by Landlord. Landlord reserves the right to monitor, in Landlord’s reasonable discretion and at Landlord’s cost, the reasonable actual cost of which shall be recoverable as an Operating Expense (except in the case of a breach of any of Tenant’s obligations under this Section, in which event such monitoring costs may be charged back entirely to Tenant and shall be reimbursed by Tenant to Landlord within ten (10) days after written demand by Landlord from time to time, accompanied by supporting documentation reasonably evidencing the costs for which such reimbursement is claimed), at such times and from time to time as Landlord in its reasonable discretion may determine, through consultants engaged by Landlord or otherwise as Landlord in its reasonable discretion may determine: (x) all aqueous and atmospheric discharges and emissions from the Premises during the Term by a Tenant Party, (y) Tenant’s compliance and the collective compliance of all tenants in the Building with requirements and restrictions relating to the occupancy classification of the Building (including, but not limited to, Hazardous Materials inventory levels of Tenant and all other tenants in the Building), and (z) Tenant’s compliance with all other requirements of this Section.

 

34


(9)    Discovery of Discharge. If Landlord, Tenant or any governmental or quasi-governmental authority discovers any Release from the Premises during the Term by a Tenant Party in violation of this Section that, in Landlord’s reasonable determination, materially jeopardizes the ability of the Building or the Project to meet applicable Laws or otherwise adversely affects the Building’s or the Project’s compliance with applicable discharge or emission standards, or if Landlord discovers any other breach of Tenant’s obligations under this Section, then upon receipt of written notice from Landlord or at such earlier time as Tenant obtains actual knowledge of the applicable discharge, emission or breach, Tenant at its sole expense shall within a reasonable time (x) in the case of a Release in violation of this Lease, cease the applicable discharge or emission and remediate any continuing effects of the discharge or emission until such time, if any, as Tenant demonstrates to Landlord’s reasonable satisfaction that the applicable discharge or emission is in compliance with all applicable Laws and any other applicable regulatory commitments and obligations to the satisfaction of the appropriate governmental agency with jurisdiction over the Release, and (y) in the case of any other breach of Tenant’s obligations under this Section, take such corrective measures as Landlord may reasonably request in writing in order to cure or eliminate the breach as promptly as practicable and to remediate any continuing effects of the breach.

(10)    Post-Occupancy Study. No later than fifteen (15) days following the Termination Date, Tenant at its sole cost and expense, shall obtain and deliver to Landlord an environmental study, performed by an expert reasonably satisfactory to Landlord, evaluating, the presence or absence of any Tenant’s Contamination in, on and about the Premises and the Project. Such study shall be based on a reasonable and prudent level of tests and investigations of the Premises and surrounding portions of the Project (if appropriate) which tests shall be conducted no earlier than fifteen (15) days prior to the Termination Date. Liability for any remedial actions required or recommended on the basis of such study shall be allocated in accordance with the applicable provisions of this Lease. To the extent any such remedial actions are the responsibility of Tenant, Tenant at its sole expense shall promptly commence and diligently pursue to completion the required remedial actions.

(11)    Emergency Response Plans. If Landlord in its reasonable discretion adopts any emergency response plan and/or any Contingency Plan and Emergency Procedures for the Building (or for multiple buildings on the Project if and to the extent applicable) as contemplated above, Landlord shall provide copies of any such plans and procedures to Tenant and, so long as such plans and procedures are reasonable, Tenant shall comply with all of the requirements of such plans and procedures to the extent applicable to Tenant and/or the Premises. If Landlord elects to adopt or materially modify any such plans or procedures that apply to the Building during the Term, Landlord shall consult with Tenant and Tenant shall cooperate, in the preparation of such plans, procedures or modifications in efforts to accurately reflect and maintain consistency with Tenant’s operations in the Premises, but Landlord alone shall determine, in its good faith reasonable discretion, the appropriate scope of such consultation and nothing in this Section shall be construed to give Tenant any right of approval or disapproval over Landlord’s adoption or modification of any such plans or procedures.

(12)    Radioactive Materials. Without limiting any other applicable provisions of this Section, if Tenant Handles or proposes to Handle any Radioactive Materials in or about the Premises, Tenant shall provide Landlord with copies of Tenant’s licenses or permits for such

 

35


Radioactive Materials and with copies of all radiation protection programs and procedures required under applicable Laws or otherwise adopted by Tenant from time to time in connection with Tenant’s Handling of such Radioactive Materials. In addition, Tenant shall comply with any and all rules and procedures issued by Landlord in its good faith discretion from time to time with respect to the Handling of Radioactive Materials on the Project (such as, by way of example but not limitation, rules implementing a label defacement program for decayed waste destined for common trash and/or rules relating to transportation and storage of Radioactive Materials on the Project), provided that such rules and procedures shall be reasonable and not in conflict with any applicable Laws.

(13)    Deemed Holdover Occupancy. Notwithstanding any other provisions of this Lease, Tenant expressly agrees as follows:

(i)    If Tenant Handles any Radioactive Materials in or about the Premises or the Project during the Term, then for so long as any license or permit relating to such Radioactive Materials remains open or valid following the Termination Date, and another entity handling Radioactive Materials which is a prospective tenant of Landlord is legally prohibited from occupying a portion of the Premises for a use similar to Tenant’s use, then Tenant shall be deemed to be occupying that portion of the Premises on a holdover basis without Landlord’s consent (notwithstanding such otherwise applicable termination or expiration of the Term) and shall be required to continue to pay Rent and other charges in accordance with Article 13 solely for that portion of the Premises effected by the radioactive materials license, until such time as all such Radioactive Materials licenses and permits have been fully closed out in accordance with the requirements of this Lease and with all applicable Hazardous Materials Laws and other Laws.

(ii)    If Tenant Handles any Hazardous Materials in or about the Premises or the Project during the Term and, on or before the Termination Date, has failed to remove from the Premises or the Project all known Hazardous Materials Handled by a Tenant Party or has failed to complete any remediation or removal of Tenant’s Contamination and/or to have fully remediated in compliance with the requirements of this Lease and with all applicable Hazardous Materials Laws and any other applicable Laws, the Tenant’s Handling and/or Release (if applicable) of any such Hazardous Materials during the Term, then for so long as such circumstances continue to exist, Tenant shall be deemed to be occupying the Premises on a holdover basis without Landlord’s consent (notwithstanding such otherwise applicable termination or expiration of the Term) and shall be required to continue to pay Rent and other charges in accordance with Article 13 until such time as all such circumstances have been fully resolved in accordance with the requirements of this Lease and with all applicable Hazardous Materials Laws and other Laws.

(14)    Survival of Obligations. Each party’s obligations under this Section shall survive the Termination Date and shall survive any conveyance by Landlord of its interest in the Premises. The provisions of this Section and any exercise by either party of any of the rights and remedies contained herein shall be without prejudice to any other rights and remedies that such party may have under this Lease or under applicable Law with respect to any Environmental Conditions and/or any Hazardous Materials. Either party’s exercise or failure to exercise, at any time or from time to time, any or all of the rights granted in this Section shall not in any way impose any liability on such party or shift from the other party to such party any responsibility or obligation imposed upon the other party under this Lease or under Hazardous Materials Laws, Environmental Conditions and/or compliance with Laws.

 

36


(15)    Laboratory Rules and Regulations. Tenant agrees for itself and for its subtenants, employees, agents, and invitees to comply with the laboratory rules and regulations (“Laboratory Rules and Regulations”) attached to this Lease as Exhibit C-1 and with all reasonable modifications and additions thereto which Landlord may make from time to time.

7.2    LANDLORD ACCESS TO PREMISES; APPROVALS

(a)    Tenant shall permit Landlord to erect, use and maintain pipes, ducts, wiring and conduits in and through the Premises, so long as Tenant’s use, layout or design of the Premises is not materially or adversely affected or altered. Landlord or Landlord’s agents shall have the right to enter upon the Premises in the event of an emergency (with notice provided as reasonably practical thereafter), or to inspect the Premises, to perform any services required hereunder, to conduct safety and other testing in the Premises and to make such repairs, alterations, improvements or additions to the Premises or the Building or other parts of the Property as Landlord may deem reasonably necessary or desirable (including all alterations, improvements and additions in connection with a change in service provider or providers). Any entry or work by Landlord may be during Standard Operating Hours and Landlord shall use commercially reasonable efforts to ensure that any entry or work shall not materially or adversely interfere with Tenant’s occupancy of the Premises.

(b)    Advance notice shall not be required for entry in the event of an emergency or urgent situation, as reasonably determined by Landlord, but any other entry or work by Landlord shall be upon at least one (1) business day’s prior notice to Tenant, which notice may be delivered orally or by e-mail to Tenant’s on-site manager at the Premises. If Tenant shall not be personally present to permit an entry into the Premises when for any reason an entry therein shall be necessary or permissible, Landlord (or Landlord’s agents), after attempting to notify Tenant (unless Landlord believes an emergency situation exists), may enter the Premises without rendering Landlord or its agents liable therefor, and without relieving Tenant of any obligations under this Lease.

(c)    Landlord may enter the Premises for the purpose of conducting such inspections, tests and studies as Landlord may deem reasonably desirable or necessary to confirm Tenant’s compliance with all Laws and Hazardous Materials Laws or for other purposes necessary in Landlord’s reasonable judgment to ensure the sound condition of the Property and the systems serving the Property. Landlord’s rights under this Section 7.2(c) are for Landlord’s own protection only, and Landlord has not, and shall not be deemed to have assumed, any responsibility to Tenant or any other party as a result of the exercise or non-exercise of such rights, for compliance with Laws or Hazardous Materials Laws or for the accuracy or sufficiency of any item or the quality or suitability of any item for its intended use.

(d)    Landlord may do any of the foregoing, or undertake any of the inspection or work described in the preceding paragraphs without such action constituting an actual or constructive eviction of Tenant, in whole or in part, or giving rise to an abatement of Rent by reason of loss or interruption of business of Tenant, or otherwise provided, however, such actions by Landlord or its agents do not materially or adversely interfere with Tenant’s use and business at the Premises.

 

37


(e)    The review, approval or consent of Landlord with respect to any item required or permitted under this Lease is for Landlord’s own protection only, and Landlord has not, and shall not be deemed to have assumed, any responsibility to Tenant or any other party, as a result of the exercise or non-exercise of such rights, for compliance with Laws or Hazardous Materials Laws or for the accuracy or sufficiency of any item or the quality or suitability of any item for its intended use.

(f)    Landlord covenants and agrees to keep confidential and not disclose to any other person or entity any proprietary or confidential information of Tenant, Tenant’s business or Tenant’s use of the Premises, whether or not in writing and whether or not labeled or identified as confidential or proprietary and which are confidential and proprietary, which may include inventions, trade secrets, technical information, know-how, product and pricing information and plans, research and development activities, marketing plans and activities, customer, supplier and prospect information, and information which Landlord may have access to or otherwise obtain during the Term (the “Confidential Information”). Landlord shall endeavor to protect and safeguard the confidentiality of such Confidential Information with reasonable care and diligence. The foregoing obligations and restrictions shall not apply to such confidential or proprietary information that: (i) was or becomes generally available to the public not as a result of a disclosure by Landlord or its agents, (ii) must be disclosed under a court order compelling such disclosure but only after Landlord provides at least twenty (20) days written notice to Tenant prior to any disclosure so as to enable Tenant to oppose any such court order, or (iii) is shared with Landlord’s accountants, attorney, lenders or prospective buyers of the Building to the extent necessary to render professional services; provided, however, such parties shall be informed of, and be bound, by the provisions of this Section. This provision shall survive the termination or expiration of this Lease for a period of five (5) years.

7.3    QUIET ENJOYMENT

Landlord covenants, in lieu of any implied covenant of quiet possession or quiet enjoyment, that so long as Tenant is in compliance with the covenants and conditions set forth in this Lease, Tenant shall have the right to quiet enjoyment of the Premises without hindrance or interference from Landlord or those claiming through Landlord, and subject to the covenants and conditions set forth in this Lease and to the rights of any Mortgagee or ground lessor.

7.4    TRANSPORTATION DEMAND MANAGEMENT PROGRAM

(a)    Landlord may elect or may be required to develop and implement a Transportation Demand Management (“TDM”) program for the Building in order to reduce the traffic-related impacts resulting from development of the Property. One element of any such TDM program will require tenants of the Building to adopt programs and offer incentives to their employees to reduce auto use and support the increase of alternative modes of transit. The following are examples of such programs and incentives:

(1)    Alternative commute subsidies and/or parking cash-out, where employees are provided with a subsidy if they use transit or commute by alternative modes;

 

38


(2)    Opportunities to purchase commuter checks which allow employees to purchase transit tickets at discounted rates from their before-tax income; and

(3)    Compressed work weeks and flex time where employees adjust their work schedules to reduce peak hour trips to/from the Building.

(b)    In order to support any such TDM program for the Building, Tenant agrees that it shall adopt programs and offer incentives to its employees in order to reduce auto use and support the increase of alternative modes of transit. The specifics of Tenant’s programs and incentives shall be tailored to the needs of Tenant’s workforce and shall be determined by Tenant in its good faith efforts to meet the goals of the TDM program. Upon request by Landlord from time to time, but not more often than once per calendar year, Tenant shall provide to Landlord a written report summarizing the programs and incentives being offered by Tenant to achieve the goals of the TDM program.

ARTICLE 8

MAINTENANCE

8.1    LANDLORDS MAINTENANCE

Subject to the provisions of Articles 4 and 14, Landlord shall, as an Operating Expense, maintain and make necessary repairs to the foundations, roofs, exterior walls, and the structural elements of the Building, the electrical (which shall include, without limitation, light fixtures and replacement of bulbs and ballasts), plumbing, heating, ventilating, air-conditioning, mechanical, communication, security and the fire and life safety systems of the Premises and the Building (including those portions of those Building-wide systems that serve and are located within the Premises) and those corridors, washrooms and lobbies which are Common Areas of the Building, except that: (a) Landlord shall not be responsible for the maintenance or repair of any floor or wall coverings in the Premises or any of the type of systems listed above which are solely servicing the Premises, located within the Premises and are supplemental or special to the Building’s standard systems; and (b) the cost of performing any of said maintenance or repairs whether to the Premises or to the Building caused by the gross negligence of Tenant, its employees, agents, servants, licensees, subtenants, contractors or invitees, shall be paid by Tenant, subject to the waivers set forth in Section 16.4. Landlord shall not be liable to Tenant for any expense, injury, loss or damage resulting from work done in or upon, or in connection with the use of, any adjacent or nearby building, land, street or alley except to the extent caused by Landlord or its employees’, contractors’ or agents’ gross negligence or willful misconduct.

8.2    TENANTS MAINTENANCE

Tenant shall periodically inspect the Premises to identify any conditions that are dangerous or in need of maintenance, repair or replacement. Tenant shall endeavor to promptly provide Landlord with notice of any such conditions. Tenant shall, at its sole cost and expense, perform all maintenance, repair and replacement of the Premises that are not Landlord’s express responsibility under this Lease, and keep the Premises in good condition and repair, reasonable wear and tear, condemnation and casualty excepted. Tenant’s maintenance, repair and replacement obligations include, without limitation, maintenance, repairs and replacements of:

 

39


(a) floor covering; (b) interior partitions; (c) doors; (d) the interior side of demising walls; (e) electronic, phone and data cabling, wiring and related equipment that is installed by or for the exclusive benefit of Tenant (collectively, “Cable”); (f) supplemental air conditioning units, kitchens, including hot water heaters, plumbing, and similar facilities exclusively serving Tenant; and (g) Tenant Alterations; provided, however, the cost of performing any of said maintenance or repairs caused by the gross negligence of Landlord, its employees, agents, servants or contractors, shall be paid by Landlord. To the extent Landlord is not reimbursed by insurance proceeds, Tenant shall reimburse Landlord for the cost of repairing damage to the Building caused by the acts of Tenant, Tenant Parties and their respective contractors and vendors. All maintenance, repairs and replacements, including, but not limited to, janitorial and cleaning services, pest control and waste management and recycling performed by or on behalf of Landlord or Tenant must comply with the Project’s Sustainability Practices and Tenant is strongly encouraged to comply with the applicable Green Building Standards. If Tenant fails to make any repairs or replacements to the Premises for more than thirty (30) days after notice from Landlord (although notice shall not be required in an emergency), Landlord may make the repairs or replacements, and Tenant shall pay, as additional Rent under this Lease, the reasonable actual out-of-pocket cost of the repairs or replacements upon receipt of paid invoices. Tenant hereby waives all right to make repairs or replacements at the expense of Landlord or in lieu thereof to vacate the Premises and its other similar rights as provided in California Civil Code Sections 1932(1), 1941 and 1942 or any other Laws (whether now or hereafter in effect). In addition to the foregoing, Tenant shall be responsible for all costs in connection with maintaining, repairing and replacing all special tenant fixtures and improvements, including garbage disposals, showers, plumbing, water filtration systems and appliances, located within or exclusively serving the Premises, except that Landlord shall be responsible for all costs in connection with maintaining, repairing and replacing any restrooms existing in the Premises as of the Commencement Date, which costs Landlord shall include in Operating Expenses. If Tenant requests that Landlord maintain, repair and/or replace any such fixtures and improvements, Tenant shall reimburse Landlord for the cost of all such maintenance, repair and replacement work, plus an administrative fee equal to fifteen percent (15%) of such cost, as additional Rent under this Lease, and Landlord’s liability for such maintenance, repair and replacement work shall be subject to and limited by the provisions of Article 17 below.

8.3    SUDDEN WATER INTRUSION.

Notwithstanding anything in this Lease to the contrary, in the event of sudden water intrusion into the Premises, due to a leaking or bursting pipe or other water source, Landlord will have the right, but not the obligation, to undertake immediate mitigation and repairs measures (the “Water Damage Work”) of such nature as would normally be Tenant’s responsibility under Section 8.2 above and to notify Tenant promptly after the repairs have been undertaken (including notice by telephone, to the extent reasonably practicable). Landlord shall determine, in its sole and absolute discretion, the contractors to be used for the Water Damage Work, and Tenant will reimburse Landlord for the reasonable cost of the Water Damage Work, as additional Rent under this Lease, within 30 days following Tenant’s receipt of written demand from Landlord therefor.

 

40


ARTICLE 9

ALTERATIONS AND IMPROVEMENTS

9.1    TENANT ALTERATIONS

(a)    The following provisions shall apply to the completion of any Tenant Alterations:

(1)    Tenant shall not, except as provided herein, without the prior written consent of Landlord except for Cosmetic Alterations (as hereinafter defined), which consent shall not be unreasonably withheld, conditioned or delayed, make or cause to be made any Tenant Alterations in or to the Premises or any Property systems serving the Premises to the Premises. Notwithstanding anything in this Section 9.1 to the contrary, Landlord’s consent shall not be required for any Tenant Alteration that satisfies all of the following criteria (a “Cosmetic Alteration”): (A) is of a cosmetic nature such as painting, wallpapering, hanging pictures and installing carpeting; (B) is not visible from the exterior of the Premises or Building; (C) will not affect the Building’s systems; (D) does not require work to be performed inside the walls or above the ceiling of the Premises; (E) does not require a building permit; and (f) does not exceed $100,000.00 for any single Cosmetic Alteration. Cosmetic Alterations shall be subject to all the other provisions of this Section 9.1. Prior to making any Tenant Alterations, Tenant shall give Landlord ten (10) days prior written notice (or such earlier notice as would be necessary pursuant to applicable Law) to permit Landlord sufficient time to post appropriate notices of nonresponsibility. Tenant shall furnish Landlord with the names and addresses of all contractors and subcontractors and copies of all contracts. All Tenant Alterations shall be completed at such time and in such manner as Landlord may from time to time reasonably designate, and only by contractors or mechanics approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed; provided, however, that Landlord may, in its sole discretion, specify the engineers and contractors to perform all work relating to the Building’s systems (including the mechanical, heating, plumbing, security, ventilating, air-conditioning, electrical, communication and the fire and life safety systems in the Building). The contractors, mechanics and engineers who may be used are further limited to those whose work will not cause or threaten to cause disharmony or interference with Landlord or other tenants in the Building and their respective agents and contractors performing work in or about the Building. Landlord may further condition its consent upon Tenant furnishing to Landlord and Landlord approving prior to the commencement of any work or delivery of materials to the Premises related to the Tenant Alterations such of the following as specified by Landlord: architectural plans and specifications, opinions from Landlord’s engineers stating that the Tenant Alterations will not in any way adversely affect the Building’s systems, necessary permits and licenses, certificates of insurance, and such other documents in such form reasonably requested by Landlord. Landlord may, in the exercise of reasonable judgment, request that Tenant provide Landlord with appropriate evidence of Tenant’s ability to complete and pay for the completion of the Tenant Alterations such as a performance bond or letter of credit. Upon completion of the Tenant Alterations, Tenant shall deliver to Landlord an as-built digitized set of plans and specifications for the Tenant Alterations in both protected document (“.pdf”) and computer-aided design (“CAD”) formats.

(2)    Tenant shall pay the cost of all Tenant Alterations and the cost of decorating the Premises and any work to the Property occasioned thereby. Upon completion of Tenant Alterations, Tenant shall furnish Landlord with contractors’ affidavits and full and final waivers of lien and receipted bills covering all labor and materials expended and used in connection therewith and such other documentation reasonably requested by Landlord or Mortgagee.

 

41


(3)    Tenant agrees to complete all Tenant Alterations (i) in accordance with all Laws, Hazardous Materials Laws, all requirements of applicable insurance companies and in accordance with Landlord’s standard construction rules and regulations, (ii) in a good and workmanlike manner with the use of good grades of materials, and (iii) in accordance with the requirements of the Project’s Sustainability Practices and Tenant is strongly encouraged to comply with the applicable Green Building Standards. Tenant shall promptly notify Landlord if Tenant receives any notice of violation of any Law in connection with completion of any Tenant Alterations and shall take such steps as are necessary to remedy such violation. In no event shall such supervision or right to supervise by Landlord nor shall any approvals given by Landlord under this Lease constitute any warranty by Landlord to Tenant of the adequacy of the design, workmanship or quality of such work or materials for Tenant’s intended use or of compliance with the requirements of Section 9.1(a)(3)(i) and (ii) above or impose any liability upon Landlord in connection with the performance of such work.

(b)    For any Tenant Alterations which Tenant requests Landlord to install, the forgoing provisions of this Section 9.1 shall apply; provided, however, in addition to paying the cost of the Tenant Alterations, Tenant also shall pay an administrative fee equal to fifteen percent (15%) of such cost to Landlord, as additional Rent under this Lease, and Landlord’s liability for such Tenant Alterations work shall be subject to and limited by the provisions of Article 17 below. All Tenant Additions, whether installed by Landlord or Tenant, shall without compensation or credit to Tenant, become part of the Premises and the property of Landlord at the time of their installation and shall remain in the Premises, unless pursuant to Article 12, Tenant may remove them or is required to remove them at Landlord’s request.

9.2    LIENS

Tenant shall not permit any lien or claim for lien of any mechanic, laborer or supplier or any other lien to be filed against the Building, the Land, the Premises, or any other part of the Property arising out of work performed, or alleged to have been performed by, or at the direction of, or on behalf of Tenant. If any such lien or claim for lien is filed, Tenant shall within ten (10) days after receiving notice of such lien or claim (a) have such lien or claim for lien released of record or (b) deliver to Landlord a bond in form, content, amount, and issued by surety, satisfactory to Landlord, indemnifying, protecting, defending and holding harmless the Indemnitees against all costs and liabilities resulting from such lien or claim for lien and the foreclosure or attempted foreclosure thereof. If Tenant fails to take any of the above actions, Landlord, in addition to its rights and remedies under Article 11, without investigating the validity of such lien or claim for lien, may pay or discharge the same and Tenant shall, as payment of additional Rent hereunder, reimburse Landlord upon demand for the amount so paid by Landlord, including Landlord’s expenses and attorneys’ fees.

 

42


ARTICLE 10

ASSIGNMENT AND SUBLETTING

10.1    ASSIGNMENT AND SUBLETTING

(a)    Excluding any assignment or sublease contemplated in Section 10.1(e), without the prior written consent of Landlord, which consent of Landlord shall not be unreasonably withheld, conditioned or delayed, Tenant may not sublease, assign, mortgage, pledge, hypothecate or otherwise transfer or permit the transfer of this Lease or the encumbering of Tenant’s interest therein in whole or in part, by operation of Law or otherwise or permit the use or occupancy of the Premises, or any part thereof, by anyone other than Tenant. Tenant agrees that the provisions governing sublease and assignment set forth in this Article 10 shall be deemed to be reasonable. If Tenant desires to enter into any sublease of the Premises or assignment of this Lease, Tenant shall deliver written notice thereof to Landlord (“Tenant’s Notice”), together with the identity of the proposed subtenant or assignee and the proposed principal terms thereof and financial and other information sufficient for Landlord to make an informed judgment with respect to such proposed subtenant or assignee at least forty-five (45) days prior to the commencement date of the term of the proposed sublease or assignment. If Tenant proposes to sublease less than all of the Rentable Area of the Premises, the space proposed to be sublet and the space retained by Tenant must each be a marketable unit as reasonably determined by Landlord and otherwise in compliance with all Laws. Landlord shall notify Tenant in writing of its approval or disapproval of the proposed sublease or assignment or its decision to exercise its rights under Section 10.2 within thirty (30) days after receipt of Tenant’s Notice (and all required information). In no event may Tenant publicly offer or advertise all or any portion of the Premises for assignment or sublease at a rental less than that then sought by Landlord for a direct lease (non-sublease) of comparable space in the Project. Tenant shall submit for Landlord’s approval (which approval shall not be unreasonably withheld) any advertising which Tenant or its agents intend to use with respect to the space proposed to be sublet.

(b)    With respect to Landlord’s consent to an assignment or sublease, Landlord may take into consideration any factors that Landlord may deem relevant, and the reasons for which Landlord’s denial shall be deemed to be reasonable shall include, without limitation, the following:

(i)    the business reputation or creditworthiness of any proposed subtenant or assignee is not acceptable to Landlord; or

(ii)    in Landlord’s reasonable judgment the proposed assignee or sublessee would diminish the value or reputation of the Project or Landlord, or would increase the expenses associated with operating, maintaining and repairing the Project; or

(iii)    any proposed assignee’s or sublessee’s use of the Premises would violate Section 7.1 of this Lease or would violate the provisions of any other leases of tenants in the Project; or

(iv)    the portion of the Premises retained by Tenant after a proposed sublease would not which constitute a “marketable unit”, meaning that such space would be: (A) deprived of ready access to the then-current corridor and elevator lobby without extension or reconfiguration of the corridor or creation of a connecting corridor; or (B) rendered in violation of any building code requirements; or (C) lacking exterior windows; or

 

43


(v)    the proposed sublessee or assignee is a current occupant of the Project or a bona fide prospective tenant of Landlord in the Project as demonstrated by a written proposal dated within six (6) months prior to the date of Tenant’s request and Landlord has vacancy in the Project of a similar size and finish as the space subject to such proposed sublease or assignment; or

(vi)    the proposed sublessee or assignee would materially increase the estimated pedestrian and vehicular traffic to and from the Premises and the Project above that deemed typical by Landlord for office/lab use in the Project; or

(vii)    Tenant is in Default under this Lease

(c)    Any sublease or assignment shall be expressly subject to the terms and conditions of this Lease. Any subtenant or assignee shall execute such documents as Landlord may reasonably require to evidence such subtenant or assignee’s assumption of the obligations and liabilities of Tenant under this Lease. Tenant shall deliver to Landlord a copy of all agreements executed by Tenant and the proposed subtenant and assignee with respect to the Premises. Landlord’s approval of a sublease, assignment, hypothecation, transfer or third party use or occupancy shall not constitute a waiver of Tenant’s obligation to obtain Landlord’s consent to further assignments or subleases, hypothecations, transfers or third party use or occupancy.

(d)    For purposes of this Article 10, Tenant shall provide Landlord with written notice of any change in the majority control of Tenant, resulting from any transfer, sale or assignment of shares of stock of Tenant occurring by operation of Law or otherwise if Tenant is a corporation whose shares of stock are not traded publicly. If Tenant is a partnership, any change in the partners of Tenant shall be deemed to be an assignment.

(e)    For purposes of this Lease, a “Permitted Transferee” shall mean any Person which: (i) is an Affiliate; or (ii) is the corporation or other entity (the “Successor”) resulting from a merger, consolidation or non-bankruptcy reorganization with Tenant; or (iii) is otherwise a deemed assignee due to a change of control under Section 10.1(d) above; or (iv) purchases substantially all the assets or equity interests of Tenant (the “Purchaser”). Notwithstanding anything to the contrary in Sections 10.1(a) and (b), 10.2 and 10.3, provided there is no Default under this Lease, Tenant shall have the right, without the prior written consent of Landlord, to assign this Lease to a Permitted Transferee or to sublease the Premises or any part thereof to a Permitted Transferee provided that: (1) Landlord receives written notice of such assignment or sublease within thirty (30) days’ of such assignment or sublease; (2) with respect to an assignment of this Lease or a sublease of more than half the Premises, the Permitted Transferee’s net worth and liquidity are each not less than the greater of (A) Tenant’s net worth and liquidity as of the date of this Lease or (B) Tenant’s net worth and liquidity immediately prior to such assignment or subletting; (3) the Permitted Transferee expressly assumes (except a Permitted Transferee which is a deemed assignee under subpart (iii) of this Section 10.1(e) or which is a sublessee in the event of a sublease under this Section 10.1(e)) in writing reasonably satisfactory to Landlord all of the obligations of Tenant under this Lease; (4) Landlord receives within five (5) business days of the effective date

 

44


a fully executed copy of the applicable assignment or sublease agreement between Tenant and the Permitted Transferee; (5) after Landlord’s written request, Tenant and the Permitted Transferee provide such reasonable documents and information which Landlord reasonably requests for the purpose of substantiating whether or not the assignment or sublease is to a Permitted Transferee; and (6) such transfer is not being entered into for the purpose of avoiding the requirement for Landlord’s prior consent or the provisions of Sections 10.2 or 10.3. All determinations of net worth and liquidity for purposes of this Subsection shall exclude any value attributable to goodwill or going concern value.

(f)    With respect to any sublease hereunder, Tenant hereby irrevocably assigns to Landlord, effective upon any such sublease, all rent and other payments due from subtenant under the sublease, provided however, that Tenant shall have a license to collect such rent and other payments until the occurrence of a Default by Tenant under any of the provisions of this Lease. At any time after such Default, at Landlord’s option, Landlord shall have the right to give notice to the subtenant of such assignment. Landlord shall credit Tenant with any rent received by Landlord under such assignment but the acceptance of any payment on account of rent from the subtenant as the result of any such default shall in no manner whatsoever serve to release Tenant from any liability under the terms, covenants, conditions, provisions or agreement under this Lease. No such payment of rent or any other payment by the subtenant directly to Landlord and/or acceptance of such payment(s) by Landlord, regardless of the circumstances or reasons therefor, shall in any manner whatsoever be deemed an attornment by the subtenant to Landlord in the absence of a specific written agreement signed by Landlord to such an effect.

10.2    RECAPTURE

Excluding any assignment or sublease contemplated in Section 10.1(e), Landlord shall have the option to exclude from the Premises covered by this Lease (“recapture”) the space proposed to be sublet or subject to the assignment, effective as of the proposed commencement date of such sublease or assignment. If Landlord elects to recapture, Tenant shall surrender possession of the space proposed to be subleased or subject to the assignment to Landlord on the effective date of recapture of such space from the Premises, such date being the Termination Date for such space. Effective as of the date of recapture of any portion of the Premises pursuant to this section, the Monthly Base Rent, Rentable Area of the Premises and Tenant’s Share shall be adjusted accordingly.

10.3    EXCESS RENT

Tenant shall pay Landlord on the first day of each month during the term of the sublease or assignment, as additional Rent under this Lease, fifty percent (50%) of the amount by which the sum of all rent and other consideration (direct or indirect) due from the subtenant or assignee for such month exceeds: (i) that portion of the Monthly Base Rent and Rent Adjustments due under this Lease for said month which is allocable to the space sublet or assigned; and (ii) the following costs and expenses for the subletting or assignment of such space: (1) brokerage commissions and attorneys’ fees and expenses, (2) the actual costs paid in making any improvements or substitutions in the Premises required by any sublease or assignment; and (3) moving costs and other amounts actually paid with respect of such subtenant’s or assignee’s other leases or occupancy arrangements, but only to the extent same are typical, reasonable and appropriate under the prevailing market conditions. All such costs and expenses shall be amortized over the term of the sublease or assignment pursuant to sound accounting principles.

 

45


10.4    TENANT LIABILITY

Excluding any assignment or sublease contemplated in Section 10.1(e), in the event of any sublease or assignment, whether or not with Landlord’s consent, Tenant shall not be released or discharged from any liability, whether past, present or future, under this Lease, including any liability arising from the exercise of any renewal or expansion option, to the extent such exercise is expressly permitted by Landlord. Tenant’s liability shall remain primary, and in the event of default by any subtenant, assignee or successor of Tenant in performance or observance of any of the covenants or conditions of this Lease, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against said subtenant, assignee or successor. After any assignment, Landlord may consent to subsequent assignments or subletting of this Lease, or amendments or modifications of this Lease with assignees of Tenant, without notifying Tenant, or any successor of Tenant, and without obtaining its or their consent thereto, and such action shall not relieve Tenant or any successor of Tenant of liability under this Lease. If Landlord grants consent to such sublease or assignment, Tenant shall pay all reasonable attorneys’ fees and expenses incurred by Landlord with respect to such assignment or sublease. In addition, if Tenant has any options to extend the Term or to add other space to the Premises, such options shall not be available to any subtenant or assignee (unless such subtenant or assignee is a Permitted Transferee), directly or indirectly without Landlord’s express written consent, which shall not be unreasonably, conditioned or delayed.

10.5    ASSUMPTION AND ATTORNMENT

If Tenant shall assign this Lease as permitted herein, the assignee shall expressly assume all of the obligations of Tenant hereunder in a written instrument satisfactory to Landlord and furnished to Landlord not later than fifteen (15) days prior to the effective date of the assignment. Each sublease by Tenant hereunder shall be subject and subordinate to this Lease and to the matters to which this Lease is or shall be subordinate, and each subtenant by entering into a sublease is deemed to have agreed that in the event of termination, re-entry or dispossession by Landlord under this Lease, Landlord may, at its option, either terminate the sublease or take over all of the right, title and interest of Tenant, as sublandlord, under such sublease, and such subtenant shall, at Landlord’s option, attorn to Landlord pursuant to the then executory provisions of such sublease, except that Landlord shall not be: (1) liable for any previous act or omission of Tenant under such sublease; (2) subject to any counterclaim, offset or defense that such subtenant might have against Tenant; (3) bound by any previous modification of such sublease or by any rent or additional rent or advance rent which such subtenant might have paid for more than the current month to Tenant, and all such rent shall remain due and owing, notwithstanding such advance payment; (4) bound by any security or advance rental deposit made by such subtenant which is not delivered or paid over to Landlord and with respect to which such subtenant shall look solely to Tenant for refund or reimbursement; or (5) obligated to perform any work in the subleased space or to prepare it for occupancy, and in connection with such attornment, the subtenant shall execute and deliver to Landlord any instruments Landlord may reasonably request to evidence and confirm such attornment. Each subtenant or licensee of Tenant shall be deemed, automatically upon and as a condition of its occupying or using the Premises or any part thereof, to have agreed to be bound by the terms and conditions set forth in this Section 10.5.

 

46


10.6    PROCESSING EXPENSES

Tenant shall pay to Landlord, as Landlord’s cost of processing each proposed assignment or subletting (whether or not the same is ultimately approved by Landlord or consummated by Tenant), an amount equal to the sum of (i) Landlord’s reasonable attorneys’ and other professional fees, plus (ii) the sum of $2,500.00 for the cost of Landlord’s administrative, accounting and clerical time (collectively, “Processing Costs”). Notwithstanding anything to the contrary herein, Landlord shall not be required to process any request for Landlord’s consent to an assignment or subletting until Tenant has paid to Landlord the amount of Landlord’s estimate of the Processing Costs. When the actual amount of the Processing Costs is determined, it shall be reconciled with Landlord’s estimate, and any payments or refunds required as a result thereof shall promptly thereafter be made by the parties.

10.7    EFFECT OF IMPERMISSIBLE TRANSFER

Any assignment or sublease effected without Landlord’s consent in violation of this Article 10 shall, at Landlord’s option, be a noncurable Default under Section 11.1 without the necessity of any notice and grace period.

ARTICLE 11

DEFAULT AND REMEDIES

11.1    DEFAULT

The occurrence or existence of any one or more of the following shall constitute a “Default” by Tenant under this Lease:

(a)    Tenant fails to pay any installment or other payment of Rent including Rent Adjustment Deposits or Rent Adjustments within five (5) business days after receipt of written notice to Tenant that such amount is due;

(b)    Tenant vacates or abandons the Premises;

(c)    Tenant violates the restrictions on assignments and subleases set forth in Article 10 – Assignment and Subletting;

(d)    Tenant fails to maintain any insurance policy required hereunder, and fails to cure such default within ten (10) business days after written notice thereof to Tenant;

(e)    Tenant fails to observe or perform any of the other covenants, conditions or provisions of this Lease and fails to cure such default within fifteen (15) days after written notice thereof to Tenant, unless the default involves an Environmental Condition, which shall be cured forthwith or unless the failure to perform is a Default for which this Lease specifies there is no cure or grace period;

 

47


(f)    the interest of Tenant in this Lease is levied upon under execution or other legal process;

(g)    a petition is filed by or against Tenant to declare Tenant bankrupt or seeking a plan of reorganization or arrangement under any Chapter of the Bankruptcy Code, or any amendment, replacement or substitution therefor, or to delay payment of, reduce or modify Tenant’s debts, which in the case of an involuntary action is not discharged within thirty (30) days;

(h)    Tenant is declared insolvent by Law or any assignment of Tenant’s property is made for the benefit of creditors;

(i)    a receiver is appointed for Tenant or Tenant’s property, which appointment is not discharged within thirty (30) days;

(j)    any action taken by or against Tenant to reorganize or modify Tenant’s capital structure in a materially adverse way which in the case of an involuntary action is not discharged within thirty (30) days;

(k)    upon the dissolution of Tenant; or

(l)    upon the third occurrence during any 12-month period during the Term that Tenant fails to pay Rent (after the applicable notice and cure periods provided in this Section) or has breached a particular covenant of this Lease (whether or not such failure or breach is thereafter cured within any stated cure or grace period or statutory period).

Notwithstanding anything contained to the contrary in this Lease, in the event that Landlord claims that Tenant is in Default of any non-monetary term, covenant, condition or obligation hereunder (other than providing evidence of insurance) which cannot reasonably be cured within thirty (30) days after receipt of notice of such Default from Landlord, no Default shall be deemed to have occurred provided Tenant (i) has commenced the curing of such Default within such thirty (30) day period, and (ii) diligently prosecutes the performance of same.

11.2    LANDLORDS REMEDIES

(a)    A Default shall constitute a breach of this Lease for which Landlord shall have the rights and remedies set forth in this Section 11.2 and all other rights and remedies set forth in this Lease or now or hereafter allowed by Law, whether legal or equitable, and all rights and remedies of Landlord shall be cumulative and none shall exclude any other right or remedy now or hereafter allowed by applicable Law.

(b)    With respect to a Default, at any time Landlord may terminate Tenant’s right to possession by written notice to Tenant stating such election. Any written notice required pursuant to Section 11.1 shall constitute notice of unlawful detainer pursuant to California Code of Civil Procedure Section 1161 if, at Landlord’s sole discretion, it states Landlord’s election that Tenant’s right to possession is terminated after expiration of any period required by Law or any longer period required by Section 11.1. Upon the expiration of the period stated in Landlord’s written notice of termination (and unless such notice provides an option to cure within such period and Tenant cures the Default within such period), Tenant’s right to possession shall terminate and this

 

48


Lease shall terminate, and Tenant shall remain liable as hereinafter provided. Upon such termination in writing of Tenant’s right to possession, Landlord shall have the right, subject to applicable Law, to re-enter the Premises and dispossess Tenant and the legal representatives of Tenant and all other occupants of the Premises by unlawful detainer or other summary proceedings, or as otherwise permitted by Law, regain possession of the Premises and remove their property (including their trade fixtures, personal property and Required Removables pursuant to Article 12), but Landlord shall not be obligated to effect such removal, and such property may, at Landlord’s option, be stored elsewhere, sold or otherwise dealt with as permitted by Law, at the risk of, expense of and for the account of Tenant, and the proceeds of any sale shall be applied pursuant to Law. Landlord shall in no event be responsible for the value, preservation or safekeeping of any such property. Tenant hereby waives all claims for damages that may be caused by Landlord’s removing or storing Tenant’s personal property pursuant to this Section or Section 12.1, and Tenant hereby indemnifies, and agrees to defend, protect and hold harmless, the Indemnitees from any and all loss, claims, demands, actions, expenses, liability and cost (including attorneys’ fees and expenses) arising out of or in any way related to such removal or storage. Upon such written termination of Tenant’s right to possession and this Lease, Landlord shall have the right to recover damages for Tenant’s Default as provided herein or by Law, including the following damages provided by California Civil Code Section 1951.2:

(1)    the worth at the time of award of the unpaid Rent which had been earned at the time of termination;

(2)    the worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such Rent loss that Tenant proves could reasonably have been avoided;

(3)    the worth at the time of award of the amount by which the unpaid Rent for the balance of the term of this Lease after the time of award exceeds the amount of such Rent loss that Tenant proves could be reasonably avoided;

(4)    any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, without limitation, Landlord’s unamortized costs of tenant improvements, leasing commissions and legal fees incurred in connection with entering into this Lease; and

(5)    any other amounts, in addition to or in lieu of those listed above, that may be permitted by applicable Law.

The word “rent” as used in this Section 11.2 shall have the same meaning as the defined term Rent in this Lease. The “worth at the time of award” of the amount referred to in clauses (1) and (2) above is computed by allowing interest at the Default Rate. The worth at the time of award of the amount referred to in clause (3) above is computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). For the purpose of determining unpaid Rent under clause (3) above, the monthly Rent reserved in this Lease shall be deemed to be the sum of the Monthly Base Rent, monthly storage space rent, if any, the amounts last payable by Tenant as Rent Adjustments for the calendar year in which Landlord terminated this Lease as provided hereinabove, and any additional Rent under this Lease.

 

49


(c)    Even if Tenant is in Default and/or has abandoned the Premises, this Lease shall continue in effect for so long as Landlord does not terminate Tenant’s right to possession by written notice as provided in Section 11.2(b) above, and Landlord may enforce all its rights and remedies under this Lease, including the right to recover Rent as it becomes due under this Lease. In such event, Landlord shall have all of the rights and remedies of a landlord under California Civil Code Section 1951.4 (lessor may continue Lease in effect after lessee’s breach and abandonment and recover Rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations), or any successor statute. During such time as Tenant is in Default, if Landlord has not terminated this Lease by written notice and if Tenant requests Landlord’s consent to an assignment of this Lease or a sublease of the Premises, such consent shall be governed by the terms and conditions of Article 10 above. Tenant acknowledges and agrees that the provisions of Article 10 shall be deemed to constitute reasonable limitations of Tenant’s right to assign or sublet. Tenant acknowledges and agrees that in the absence of written notice pursuant to Section 11.2(b) above terminating Tenant’s right to possession, no other act of Landlord shall constitute a termination of Tenant’s right to possession or an acceptance of Tenant’s surrender of the Premises, including acts of maintenance or preservation or efforts to relet the Premises or the appointment of a receiver upon initiative of Landlord to protect Landlord’s interest under this Lease or the withholding of consent to a subletting or assignment, or terminating a subletting or assignment, if in accordance with other provisions of this Lease.

(d)    In the event that Landlord seeks an injunction with respect to a breach or threatened breach by Tenant of any of the covenants, conditions or provisions of this Lease, Tenant agrees to pay the premium for any bond required in connection with such injunction.

(e)    Tenant hereby waives any and all rights to relief from forfeiture, redemption or reinstatement granted by Law (including California Civil Code of Procedure Sections 1174 and 1179) in the event of Tenant being evicted or dispossessed for any cause or in the event of Landlord obtaining possession of the Premises by reason of Tenant’s Default or otherwise;

(f)    Notwithstanding any other provision of this Lease, a notice to Tenant given under this Article and Article 24 of this Lease or given pursuant to California Code of Civil Procedure Section 1161, and any notice served by mail, shall be deemed served, and the requisite waiting period deemed to begin under said Code of Civil Procedure Section upon mailing (except as may be required under Code of Civil Procedure Section 1161 et seq.), without any additional waiting requirement under Code of Civil Procedure Section 1011 et seq. or by other Law. For purposes of Code of Civil Procedure Section 1162, Tenant’s “place of residence”, “usual place of business”, “the property” and “the place where the property is situated” shall mean and be the Premises, whether or not Tenant has vacated same at the time of service.

(g)    The voluntary or other surrender or termination of this Lease, or a mutual termination or cancellation thereof, shall not work a merger and shall terminate all or any existing assignments, subleases, subtenancies or occupancies permitted by Tenant, except if and as otherwise specified in writing by Landlord.

 

50


(h)    No delay or omission in the exercise of any right or remedy of Landlord upon any Default by Tenant, and no exercise by Landlord of its rights pursuant to Section 26.16 to perform any duty which Tenant fails timely to perform, shall impair any right or remedy or be construed as a waiver. No provision of this Lease shall be deemed waived by Landlord or Tenant unless such waiver is in writing signed by Landlord or by Tenant, as the case may be. The waiver by Landlord or Tenant of any breach of any provision of this Lease shall not be deemed a waiver of any subsequent breach of the same or any other provision of this Lease.

11.3    ATTORNEYS FEES

In the event any party brings any suit or other proceeding with respect to the subject matter or enforcement of this Lease, the prevailing party (as determined by the court, agency or other authority before which such suit or proceeding is commenced) shall, in addition to such other relief as may be awarded, be entitled to recover attorneys’ fees, expenses and costs of investigation as actually incurred, including court costs, expert witness fees, costs and expenses of investigation, and all attorneys’ fees, costs and expenses in any such suit or proceeding (including in any action or participation in or in connection with any case or proceeding under the Bankruptcy Code, 11 United States Code Sections 101 et seq. (the “Bankruptcy Code”), or any successor statutes, in establishing or enforcing the right to indemnification, in appellate proceedings, or in connection with the enforcement or collection of any judgment obtained in any such suit or proceeding).

11.4    BANKRUPTCY

The following provisions shall apply in the event of the bankruptcy or insolvency of Tenant:

(a)    In connection with any proceeding under Chapter 7 of the Bankruptcy Code where the trustee of Tenant elects to assume this Lease for the purposes of assigning it, such election or assignment, may only be made upon compliance with the provisions of (b) and (c) below, which conditions Landlord and Tenant acknowledge to be commercially reasonable. In the event the trustee elects to reject this Lease, then Landlord shall immediately be entitled to possession of the Premises without further obligation to Tenant or the trustee.

(b)    Any election to assume this Lease under Chapter 11 or 13 of the Bankruptcy Code by Tenant as debtor-in-possession or by Tenant’s trustee (the “Electing Party”) must provide for:

The Electing Party to cure or provide to Landlord adequate assurance that it will cure all monetary defaults under this Lease within fifteen (15) business days from the date of assumption, and that it will cure all nonmonetary defaults under this Lease within thirty (30) days from the date of assumption. Landlord and Tenant acknowledge such condition to be commercially reasonable.

(c)    If the Electing Party has assumed this Lease or elects to assign Tenant’s interest under this Lease to any other person, such interest may be assigned only if the intended assignee has provided adequate assurance of future performance (as herein defined), of all of the obligations imposed on Tenant under this Lease.

 

51


For the purposes hereof, “adequate assurance of future performance” means that Landlord has ascertained that each of the following conditions has been satisfied:

(i)    The assignee has submitted a current financial statement, certified by its chief financial officer, which shows a net worth and working capital in amounts sufficient to assure the future performance by the assignee of Tenant’s obligations under this Lease; and

(ii)    Landlord has obtained consents or waivers from any third parties that may be required under a lease, mortgage, financing arrangement, or other agreement by which Landlord is bound, to enable Landlord to permit such assignment.

(d)    Landlord’s acceptance of rent or any other payment from any trustee, receiver, assignee, person, or other entity will not be deemed to have waived, or waive, the requirement of Landlord’s consent, Landlord’s right to terminate this Lease for any transfer of Tenant’s interest under this Lease without such consent, or Landlord’s claim for any amount of Rent due from Tenant.

11.5    LANDLORDS DEFAULT

Landlord shall be in default hereunder in the event Landlord has not commenced and pursued with reasonable diligence the cure of any failure of Landlord to meet its obligations hereunder within thirty (30) days after the receipt by Landlord of written notice from Tenant of the alleged failure to perform (except in the event of an emergency, in which case Landlord’s obligation to commence to cure or meet its obligation must be immediate). Failure to provide the requisite notice and cure period by Tenant under this paragraph shall be an absolute defense by Landlord against any claims for failure to perform any of its obligations. In no event shall Tenant have the right to terminate or rescind this Lease as a result of Landlord’s default as to any covenant or agreement contained in this Lease. Tenant hereby waives such remedies of termination and rescission and hereby agrees that Tenant’s remedies for default hereunder and for breach of any promise or inducement shall be limited to a suit for damages and/or injunction. In addition, Tenant hereby covenants that, prior to the exercise of any such remedies, it will give any Mortgagee notice and a reasonable time to cure any default by Landlord (as specified in Section 23.2 below).

ARTICLE 12

SURRENDER OF PREMISES

12.1    IN GENERAL

Upon the Termination Date, Tenant shall surrender and vacate the Premises and deliver possession thereof to Landlord in the same condition as on the Commencement Date, ordinary wear and tear, casualty and condemnation excepted, and any damage from casualty and condemnation, and damage caused by Landlord, shall be governed by the provisions of this Lease dealing specifically therewith. Tenant shall deliver to Landlord all keys to the Premises. All improvements in and to the Premises, including any Tenant Alterations (collectively, “Leasehold Improvements”) shall remain upon the Premises at the end of the Term without compensation to Tenant. Landlord, however, by written notice to Tenant at least 30 days prior to the Termination Date, may require Tenant, at its expense, to remove (a) any Cable, and (b) any Tenant Additions that, in Landlord’s reasonable judgment, are of a nature that would require removal and repair costs that are materially in excess of the removal and repair costs associated with standard laboratory and office improvements (collectively referred to as “Required Removables”).

 

52


Required Removables may include, without limitation, internal stairways, raised floors, personal baths and showers, vaults, rolling file systems and structural alterations and modifications. The designated Required Removables shall be removed by Tenant before the Termination Date. Tenant’s removal and disposal of items pursuant to this Section 12.1 must comply with the Project’s Sustainability Practices and Tenant is strongly encouraged to comply with the applicable Green Building Standards. Tenant shall repair damage caused by the installation or removal of Required Removables. If Tenant fails to perform its obligations in a timely manner, Landlord may perform such work at Tenant’s expense. In the event possession of the Premises is not delivered to Landlord when required hereunder, or if Tenant shall fail to remove those items described above after thirty (30) days’ written notice to Tenant, Landlord may (but shall not be obligated to), at Tenant’s expense, remove any of such property and store, sell or otherwise deal with such property, and undertake, at Tenant’s expense, such restoration work to satisfy Tenant’s obligations regarding delivery of the Premises as required in this Section. Notwithstanding anything in this Section 12.1 to the contrary, failure by Tenant to comply with the provisions of this Section 12.1 with respect to any Required Removables that are required to be removed from the Premises by Tenant hereunder shall constitute a failure of Tenant to validly surrender the Premises.

12.2    LANDLORDS RIGHTS

All property which Tenant has not removed from the Premises thirty (30) days after the Termination Date may be removed from the Premises by Landlord shall be conclusively presumed to have been abandoned by Tenant and Landlord may deal with such property as provided in Section 11.2(b), including the waiver and indemnity obligations provided in that Section. Tenant shall also reimburse Landlord for all costs and expenses incurred by Landlord in removing any Tenant Additions and in restoring the Premises to the condition required by this Lease upon Tenant’s receipt of paid invoices of such costs and expenses.

ARTICLE 13

HOLDING OVER

In the event that Tenant holds over in possession of the Premises after the Termination Date, for each month or partial month Tenant holds over possession of the Premises, then for the first three (3) months of such holding over, Tenant shall pay Landlord one hundred twenty-five percent (125%) of the monthly Rent payable for the month immediately preceding the holding over and one hundred percent (100%) of any applicable Rent Adjustments or increases to Rent Adjustments which Landlord may reasonably estimate, and thereafter, Tenant shall pay Landlord one hundred fifty percent (150%) of the monthly Rent payable for the month immediately preceding the holding over and one hundred percent (100%) of any applicable Rent Adjustments or increases to Rent Adjustments which Landlord may reasonably estimate. Tenant shall also pay all damages, excluding consequential, incidental, special or punitive damages, sustained by Landlord by reason of such holding over. The provisions of this Article shall not constitute a waiver by Landlord of any re-entry rights of Landlord, and Tenant’s continued occupancy of the Premises shall be a tenant-at-will whose tenancy is terminable at any time on not less than thirty (30) days’ written notice from Landlord.

 

53


ARTICLE 14

DAMAGE BY FIRE OR OTHER CASUALTY

14.1    SUBSTANTIAL UNTENANTABILITY

(a)    If any fire or other casualty (whether insured or uninsured) renders all or a substantial portion of the Premises or the Building untenantable, Landlord shall, with reasonable promptness after the occurrence of such damage, estimate the length of time that will be required to substantially complete the repair and restoration and shall, by written notice advise Tenant of such estimate (“Landlord’s Notice”). If Landlord estimates that the amount of time required to substantially complete such repair and restoration will exceed one hundred eighty (180) days from the date such damage occurred, then Landlord, or Tenant if all or a substantial portion of the Premises is rendered untenantable, shall have the right to terminate this Lease as of the date of such damage by delivering written notice to the other at any time within twenty (20) business days after delivery of Landlord’s Notice, provided that if Landlord so chooses, Landlord’s Notice may also constitute such notice of termination.

(b)    Unless this Lease is terminated as provided in the preceding subparagraph, Landlord shall proceed with reasonable promptness to repair and restore the Premises to its condition as existed prior to such casualty, subject to reasonable delays for insurance adjustments and Force Majeure delays, and also subject to zoning Laws and building codes then in effect. Landlord shall have no liability to Tenant, and Tenant shall not be entitled to terminate this Lease if such repairs and restoration are not in fact completed within the time period estimated by Landlord so long as Landlord shall proceed with reasonable diligence to complete such repairs and restoration.

(c)    Tenant acknowledges that Landlord shall be entitled to the full proceeds of any insurance coverage, whether carried by Landlord or Tenant, for damages to the Premises, except for those proceeds of Tenant’s insurance for its own personal property and equipment which would be removable by Tenant at the Termination Date. All such insurance proceeds shall be payable to Landlord whether or not the Premises are to be repaired and restored; provided, however, if this Lease is not terminated and the parties proceed to repair and restore Tenant Additions at Tenant’s cost, to the extent Landlord received proceeds of Tenant’s insurance covering Tenant Additions, such proceeds shall be applied to reimburse Tenant for its cost of repairing and restoring Tenant Additions.

(d)    Notwithstanding anything to the contrary herein set forth: (i) Landlord shall have no duty pursuant to this Section to repair or restore any portion of any Tenant Additions or to expend for any repair or restoration of the Premises or Building in amounts in excess of insurance proceeds paid to Landlord and available for repair or restoration; and (ii) Tenant shall not have the right to terminate this Lease pursuant to this Section if any damage or destruction was caused by the gross negligence or willful misconduct of Tenant, its agent or employees. Whether or not this Lease is terminated pursuant to this Article 14, in no event shall Tenant be entitled to any compensation or damages for loss of the use of the whole or any part of the Premises or for any inconvenience or annoyance occasioned by any such damage, destruction, rebuilding or restoration of the Premises or the Building or access thereto.

(e)    Any repair or restoration of the Premises performed by Tenant shall be in accordance with the provisions of Article 9 hereof.

 

54


14.2    INSUBSTANTIAL UNTENANTABILITY

If the Premises or the Building is damaged by a casualty but neither is rendered substantially untenantable and Landlord estimates that the time to substantially complete the repair or restoration will not exceed one hundred eighty (180) days from the date such damage occurred, then Landlord shall proceed to repair and restore the Building or the Premises other than Tenant Additions, with reasonable promptness, unless such damage is to the Premises and occurs during the last six (6) months of the Term, in which event either Tenant or Landlord shall have the right to terminate this Lease as of the date of such casualty by giving written notice thereof to the other within twenty (20) business days after the date of such casualty. Notwithstanding the aforesaid, Landlord’s obligation to repair shall be limited in accordance with the provisions of Section 14.1 above.

14.3    RENT ABATEMENT

Except for the gross negligence or willful act of Tenant or its agents, employees, contractors or invitees, if all or any part of the Premises are rendered untenantable by fire or other casualty and this Lease is not terminated, Rent, including Monthly Base Rent, Rent Adjustments, and all other payments and/or charges payable by Tenant under this Lease (other than the Amortized Tenant Improvement Allowance Payments), shall abate for that part of the Premises which is untenantable on a per diem basis from the date of the casualty until Landlord has substantially completed the repair and restoration work in the Premises which it is required to perform, provided, that as a result of such casualty, Tenant does not occupy the portion of the Premises which is untenantable during such period.

14.4    WAIVER OF STATUTORY REMEDIES

The provisions of this Lease, including this Article 14, constitute an express agreement between Landlord and Tenant with respect to any and all damage to, or destruction of, the Premises or the Property or any part of either, and any Law, including Sections 1932(2), 1933(4), 1941 and 1942 of the California Civil Code, with respect to any rights or obligations concerning damage or destruction shall have no application to this Lease or to any damage to or destruction of all or any part of the Premises or the Property or any part of either, and are hereby waived.

ARTICLE 15

EMINENT DOMAIN

15.1    TAKING OF WHOLE OR SUBSTANTIAL PART

In the event the whole or any substantial part of the Building or of the Premises is taken or condemned by any competent authority for any public use or purpose (including a deed given in lieu of condemnation) and is thereby rendered untenantable, this Lease shall terminate as of the date title vests in such authority, and Monthly Base Rent and Rent Adjustments shall be apportioned as of the Termination Date. Notwithstanding anything to the contrary herein set forth, in the event the taking is temporary (for less than the remaining Term of this Lease), Landlord may elect either (i) to terminate this Lease or (ii) permit Tenant to receive the entire award attributable to the Premises in which case Tenant shall continue to pay Rent and this Lease shall not terminate.

 

55


15.2    TAKING OF PART

In the event a part of the Building or the Premises is taken or condemned by any competent authority (or a deed is delivered in lieu of condemnation) and this Lease is not terminated, this Lease shall be amended to reduce or increase, as the case may be, the Monthly Base Rent and Tenant’s Share to reflect the Rentable Area of the Premises or Building, as the case may be, remaining after any such taking or condemnation. Landlord, upon receipt and to the extent of the award in condemnation (or proceeds of sale) shall make necessary repairs and restorations to the Premises (exclusive of Tenant Additions) and to the Building to the extent necessary to constitute the portion of the Building not so taken or condemned as a complete architectural and economically efficient unit. Notwithstanding the foregoing, if as a result of any taking, or a governmental order that the grade of any street or alley adjacent to the Building is to be changed and such taking or change of grade makes it necessary or desirable to substantially remodel or restore the Building or prevents the economical operation of the Building, Landlord shall have the right to terminate this Lease upon ninety (90) days prior written notice to Tenant.

15.3    COMPENSATION

Landlord shall be entitled to receive the entire award (or sale proceeds) from any such taking, condemnation or sale without any payment to Tenant, and Tenant hereby assigns to Landlord, Tenant’s interest, if any, in such award; provided, however, Tenant shall have the right separately to pursue against the condemning authority a separate award in respect of the loss, if any, to Tenant Additions paid for by Tenant without any credit or allowance from Landlord so long as there is no diminution of Landlord’s award as a result.

ARTICLE 16

INSURANCE

16.1    TENANTS INSURANCE

Tenant, at Tenant’s expense, agrees to maintain in force, with a company or companies acceptable to Landlord, during the Term: (a) Commercial General Liability Insurance on a primary basis and without any right of contribution from any insurance carried by Landlord covering the Premises on an occurrence basis against all claims for personal injury, bodily injury, death and property damage, including contractual liability covering the indemnification provisions in this Lease, and such insurance shall be for such limits that are reasonably required by Landlord from time to time but not less than a combined single limit (each occurrence and in the aggregate) of Five Million and No/100 Dollars ($5,000,000.00) (which limit may be achieved through use of umbrella coverage); (b) Workers’ Compensation and Employers’ Liability Insurance to the extent required by and in accordance with the Laws of the State of California; (c) “All Risks” property insurance in an amount adequate to cover the full replacement cost of all Tenant Additions, equipment, installations, fixtures and contents of the Premises in the event of loss from water damage, earthquake sprinkler leakage, and such other risks as Landlord may designate from time to time; (d) in the event a motor vehicle is to be used by Tenant in connection with its business

 

56


operation from the Premises, Comprehensive Automobile Liability Insurance coverage with limits of not less than One Million and No/100 Dollars ($1,000,000.00) combined single limit coverage against bodily injury liability and property damage liability arising out of the use by or on behalf of Tenant, its agents and employees in connection with this Lease, of any owned, non-owned or hired motor vehicles; (e) environmental liability (also known as “Pollution Legal Liability”) coverage with limits of not less than One Million and No/100 Dollars ($1,000,000.00) to cover Tenant’s indemnity obligations pursuant to Section 7.1(f)(5) above; and (f) such other insurance or coverages as Landlord reasonably requires.

16.2    FORM OF POLICIES

Each policy referred to in Section 16.1 shall satisfy the following requirements. Each policy shall (i) name Landlord and the Indemnitees as additional insureds (except Workers’ Compensation and Employers’ Liability Insurance), (ii) be issued by one or more responsible insurance companies licensed to do business in the State of California reasonably satisfactory to Landlord, (iii) where applicable, provide for deductible amounts satisfactory to Landlord and not permit co-insurance, and (iv) each policy of “All-Risks” property insurance shall provide that the policy shall not be invalidated should the insured waive in writing prior to a loss, any or all rights of recovery against any other party for losses covered by such policies. Tenant shall deliver to Landlord, certificates of insurance (and at Landlord’s request, copies of all policies and renewals thereof to be maintained by Tenant hereunder), prior to Tenant’s entry into the Premises and prior to the expiration date of each policy. Additionally, Tenant shall provide Landlord written notice of any cancellation or amendment of any such insurance within two (2) business days following Tenant’s knowledge of the same. If Tenant fails to carry the insurance required under this Article 16 or fails to provide certificates of renewal as and when required hereunder, Landlord may, but shall not be obligated to acquire such insurance on Tenant’s behalf or Tenant’s sole cost and expense.

16.3    LANDLORDS INSURANCE

Landlord agrees to purchase and keep in full force and effect during the Term hereof, including any extensions or renewals thereof, insurance under policies issued by insurers of recognized responsibility, qualified to do business in the State of California on the Building in amounts sufficient to cover not less than 80% of the replacement cost thereof, insuring against fire and such other risks as may be included in standard forms of all risk coverage insurance reasonably available from time to time (which requirement may be achieved through use of a single insurance policy covering multiple buildings owned by Landlord and affiliates of Landlord). Landlord agrees to maintain in force during the Term, Commercial General Liability Insurance covering the Building on an occurrence basis against all claims for personal injury, bodily injury, death, and property damage. Such insurance shall be for a combined single limit (each occurrence and in the aggregate) of not less than Five Million and No/100 Dollars ($5,000,000.00) (which limit may be achieved through use of umbrella coverage). Neither Landlord’s obligation to carry such insurance nor the carrying of such insurance shall be deemed to be an indemnity by Landlord with respect to any claim, liability, loss, cost or expense due, in whole or in part, to Tenant’s negligent acts or omissions or willful misconduct. Without obligation to do so, Landlord may, in its sole discretion from time to time, carry insurance in amounts greater and/or for coverage additional to the coverage and amounts set forth above.

 

57


16.4    WAIVER OF SUBROGATION

(a)    Landlord agrees that, if obtainable at no, or minimal, additional cost, and so long as the same is permitted under the laws of the State of California, it will include in its “All Risks” policies appropriate clauses pursuant to which the insurance companies (i) waive all right of subrogation against Tenant with respect to losses payable under such policies and/or (ii) agree that such policies shall not be invalidated should the insured waive in writing prior to a loss any or all right of recovery against any party for losses covered by such policies.

(b)    Tenant agrees to include, if obtainable at no, or minimal, additional cost, and so long as the same is permitted under the laws of the State of California, in its “All Risks” insurance policy or policies on Tenant Additions, whether or not removable, and on Tenant’s furniture, furnishings, fixtures and other property removable by Tenant under the provisions of this Lease, appropriate clauses pursuant to which the insurance company or companies (i) waive the right of subrogation against Landlord and/or any tenant of space in the Building with respect to losses payable under such policy or policies and/or (ii) agree that such policy or policies shall not be invalidated should the insured waive in writing prior to a loss any or all right of recovery against any party for losses covered by such policy or policies. If Tenant is unable to obtain in such policy or policies either of the clauses described in the preceding sentence, Tenant shall, if legally possible and without necessitating a change in insurance carriers, have Landlord named in such policy or policies as an additional insured. If Landlord shall be named as an additional insured in accordance with the foregoing, Landlord agrees to endorse promptly to the order of Tenant, without recourse, any check, draft, or order for the payment of money representing the proceeds of any such policy or representing any other payment growing out of or connected with said policies, and Landlord does hereby irrevocably waive any and all rights in and to such proceeds and payments.

(c)    Provided that Landlord’s right of full recovery under its policy or policies aforesaid is not adversely affected or prejudiced thereby, Landlord hereby waives any and all right of recovery which it might otherwise have against Tenant, its servants, agents and employees, for loss or damage occurring to the Real Property and the fixtures, appurtenances and equipment therein, to the extent the same is covered by Landlord’s insurance, notwithstanding that such loss or damage may result from the negligence or fault of Tenant, its servants, agents or employees. Provided that Tenant’s right of full recovery under its aforesaid policy or policies is not adversely affected or prejudiced thereby, Tenant hereby waives any and all right of recovery which it might otherwise have against Landlord, its servants, and employees and against every other tenant of the Real Property who shall have executed a similar waiver as set forth in this Section 16.4(c) for loss or damage to Tenant Additions, whether or not removable, and to Tenant’s furniture, furnishings, fixtures and other property removable by Tenant under the provisions hereof to the extent the same is coverable by Tenant’s insurance required under this Lease, notwithstanding that such loss or damage may result from the negligence or fault of Landlord, its servants, agents or employees, or such other tenant and the servants, agents or employees thereof.

(d)    Landlord and Tenant hereby agree to advise the other promptly if the clauses to be included in their respective insurance policies pursuant to subparagraphs (a) and (b) above cannot be obtained on the terms hereinbefore provided. Landlord and Tenant hereby also agree to notify the other promptly of any cancellation or change of the terms of any such policy that would affect such clauses.

 

58


16.5    NOTICE OF CASUALTY

Tenant shall give Landlord notice in case of a fire or accident in the Premises promptly after Tenant is aware of such event.

ARTICLE 17

WAIVER OF CLAIMS AND INDEMNITY

17.1    WAIVER OF CLAIMS

To the extent permitted by Law, Tenant hereby releases the Indemnitees from, and waives all claims for, damage to person or property sustained by Tenant or any occupant of the Premises or the Property resulting directly or indirectly from any existing or future condition, defect, matter or thing in and about the Premises or the Property or any part of either or any equipment or appurtenance therein, or resulting from any accident in or about the Premises or the Property, or resulting directly or indirectly from any act or neglect of any tenant or occupant of the Property or of any other person, including Landlord’s agents and servants, except to the extent caused by the gross negligence or willful and wrongful act of any of the Indemnitees; provided, however, that the foregoing indemnity shall not be applicable to claims arising due to the active negligence or willful misconduct of Landlord or any Indemnitees. To the extent permitted by Law, Tenant hereby waives any consequential damages, compensation or claims for inconvenience or loss of business, rents, or profits as a result of such injury or damage. If any such damage, whether to the Premises or the Property or any part of either, or whether to Landlord or to other tenants in the Property, results from any act or neglect of Tenant, its employees, servants, agents, contractors, invitees or customers, Tenant shall be liable therefor and Landlord may, at Landlord’s option, repair such damage and Tenant shall, upon demand by Landlord, as payment of additional Rent hereunder, reimburse Landlord within ten (10) days after demand (which shall include documentation evidencing payment of any repair costs) for the total cost of such repairs, in excess of amounts, if any, paid to Landlord under insurance covering such damages. Tenant shall not be liable for any such damage caused by its acts or neglect if Landlord or a tenant has recovered the full amount of the damage from proceeds of insurance policies and the insurance company has waived its right of subrogation against Tenant.

17.2    INDEMNITY

(a)    To the extent permitted by Law, Tenant hereby indemnifies, and agrees to protect, defend and hold the Indemnitees harmless, against any and all actions, claims, demands, liability, costs and expenses, including attorneys’ fees and expenses for the defense thereof, arising from Tenant’s occupancy of the Premises, from the undertaking of any Tenant Additions or repairs to the Premises, from the conduct of Tenant’s business on the Premises, or from any breach or default (beyond applicable notice and cure periods) on the part of Tenant in the performance of any covenant or agreement on the part of Tenant to be performed pursuant to the terms of this Lease, or from any willful act or negligence of Tenant, its agents, contractors, servants, employees, customers or invitees, in or about the Premises or the Property or any part of either. In case of any action or proceeding brought against the Indemnitees by reason of any such claim, upon notice from Landlord, Tenant covenants to defend such action or proceeding by counsel chosen by Landlord, in Landlord’s sole discretion. Landlord reserves the right to settle, compromise or

 

59


dispose of any and all actions, claims and demands related to the foregoing indemnity. The foregoing indemnity shall not operate to relieve Indemnitees of liability to the extent such liability is caused by the willful and wrongful act of Indemnitees. Further, the foregoing indemnity is subject to and shall not diminish any waivers in effect in accordance with Section 16.4 by Landlord or its insurers to the extent of amounts, if any, paid to Landlord under its “All Risks” property insurance. This Section 17.2(a) shall survive the expiration or earlier termination of this Lease.

(b)    Subject to the provisions of Sections 17.1 and 17.2(a) above, Landlord shall indemnify, defend and protect Tenant (and its partners, officers, shareholders, directors, members, managers, trustees, beneficiaries, employees, transferees, principals, contractors, servants, agents and representatives; Tenant and such other parties being referred to herein each as a “Tenant Indemnitee” and collectively as the “Tenant Indemnitees”), and hold Tenant Indemnitees harmless of and from any and all claims, proceedings, loss, cost, damage, causes of action, liabilities, injury or expense, including attorneys’ fees and expenses for the defense thereof, arising out of (i) the condition or design of the Common Areas, or (ii) the negligence or willful misconduct of Landlord or its authorized agents; provided, however, that the foregoing indemnity in subsection (ii) shall not be applicable to claims to the extent arising by reason of the active negligence or willful misconduct of Tenant or any Tenant Indemnitees. The foregoing notwithstanding, Landlord shall not be required to indemnify or defend Tenant Indemnitees from any claims, proceedings, loss, cost, damage, causes of action, liabilities, injury or expense arising out of or related to theft, fire, vandalism, assault, battery, act of God, breaches of security, acts of the public enemy, acts of terrorists or criminals, riot, strike, insurrection, war, court order, requisition or order of governmental body or authority, whether or not the negligence of Landlord or its agents or employees was a cause of, or in any way contributed to, such loss, damage, death or injury. This Section 17.2(b) shall survive the expiration or earlier termination of this Lease.

17.3    WAIVER OF CONSEQUENTIAL DAMAGES

To the extent permitted by law, and except as otherwise specified in this Lease, Tenant hereby waives and releases the Indemnitees from any consequential damages, compensation or claims for inconvenience or loss of business, rents or profits as a result of any injury or damage, whether or not caused by the willful and wrongful act of any of the Indemnitees. To the extent permitted by law, and except as otherwise specified in this Lease, Landlord hereby waives and releases the Tenant Indemnitees from any consequential damages, compensation or claims for inconvenience or loss of business, rents or profits as a result of any injury or damage, whether or not caused by the willful and wrongful act of any of the Tenant Indemnitees.

ARTICLE 18

RULES AND REGULATIONS

18.1    RULES

Tenant agrees for itself and for its subtenants, employees, agents, and invitees to comply with the rules and regulations listed on Exhibit C-2 attached hereto and with all reasonable modifications and additions thereto which Landlord may make from time to time.

 

60


18.2    ENFORCEMENT

Nothing in this Lease shall be construed to impose upon Landlord any duty or obligation to enforce the rules and regulations as set forth on Exhibit C-2 or as hereafter adopted, or the terms, covenants or conditions of any other lease as against any other tenant, and Landlord shall not be liable to Tenant for violation of the same by any other tenant, its servants, employees, agents, visitors or licensees. Landlord shall use reasonable efforts to enforce the rules and regulations of the Project in a uniform and non-discriminatory manner. In the event of any conflict between the rules and regulations enacted by Landlord and the terms of this Lease, the terms of this Lease shall control.

ARTICLE 19

LANDLORD’S RESERVED RIGHTS

Landlord shall have the following rights exercisable without notice to Tenant and without liability to Tenant for damage or injury to persons, property or business and without being deemed an eviction or disturbance of Tenant’s use or possession of the Premises or giving rise to any claim for offset or abatement of Rent: (1) to change the Building’s name or street address upon thirty (30) days’ prior written notice to Tenant; (2) to install, affix and maintain all signs on the exterior and/or interior of the Building; (3) to designate and/or approve prior to installation, all types of signs, window shades, blinds, drapes, awnings or other similar items, and all internal lighting that may be visible from the exterior of the Premises; (4) upon reasonable notice to Tenant, to display the Premises to prospective purchasers and lenders at reasonable hours at any time during the Term and to prospective tenants at reasonable hours during the last twelve (12) months of the Term; (5) to grant to any party the exclusive right to conduct any business or render any service in or to the Building, provided such exclusive right shall not operate to prohibit Tenant from using the Premises for the purpose permitted hereunder; (6) to change the arrangement and/or location of entrances or passageways, doors and doorways, corridors, elevators, stairs, washrooms or public portions of the Building, and to close entrances, doors, corridors, elevators or other facilities, provided that such action shall not materially and adversely interfere with Tenant’s access to the Premises or the Building; (7) to have access for Landlord and other tenants of the Building to any mail chutes and boxes located in or on the Premises as required by any applicable rules of the United States Post Office; and (8) to close the Building after Standard Operating Hours, except that Tenant and its employees and invitees shall be entitled to admission at all times, under such regulations as Landlord prescribes for security purposes.

ARTICLE 20

ESTOPPEL CERTIFICATE

20.1    IN GENERAL

Within ten (10) business days after written request therefor, together with the proposed form of estoppel certificate (an “Estoppel Certificate”), by Landlord, Mortgagee or any prospective mortgagee or owner, Tenant agrees as directed in such request to execute such Estoppel Certificate (which may require that such instrument be notarized), binding upon Tenant, certifying (i) that this Lease is unmodified and in full force and effect (or if there have been modifications, a description of such modifications and that this Lease as modified is in full force and effect); (ii) the dates to

 

61


which Rent has been paid; (iii) that Tenant is in the possession of the Premises if that is the case; (iv) that Landlord is not in default under this Lease, or, if Tenant believes Landlord is in default, the nature thereof in detail; (v) that Tenant has no offsets or defenses to the performance of its obligations under this Lease (or if Tenant believes there are any offsets or defenses, a full and complete explanation thereof); (vi) that the Premises have been completed in accordance with the terms and provisions hereof or the Workletter, that Tenant has accepted the Premises and the condition thereof and of all improvements thereto and has no claims against Landlord or any other party with respect thereto; (vii) that if an assignment of rents or leases has been served upon Tenant by a Mortgagee, Tenant will acknowledge receipt thereof and agree to be bound by the provisions thereof; (viii) that Tenant will give to the Mortgagee copies of all notices required or permitted to be given by Tenant to Landlord; and (ix) to any other information reasonably requested.

20.2    ENFORCEMENT

In the event that (a) Tenant fails to timely deliver an Estoppel Certificate, (b) such failure continues following a second, five (5) business days’ written notice, and (c) Tenant has neither delivered the Estoppel Certificate, nor provided written notice of its good faith comments to or good faith dispute with the contents of such Estoppel Certificate, then such failure shall be a Default for which there shall be no cure or grace period. In addition to any other remedy available to Landlord, Landlord may impose a charge equal to $500.00 for each day that Tenant fails to deliver an Estoppel Certificate (or a good faith dispute notice) following such second written notice; and (i) Tenant shall be bound to, and deemed to have irrevocably agreed to, the accuracy and truthfulness of the Estoppel Certificate delivered to Tenant, and (ii) Landlord, and any third party receiving such form of Estoppel Certificate, including a Mortgagee or purchaser, may rely upon the accuracy and truthfulness thereof.

ARTICLE 21

RELOCATION OF TENANT

At any time after the Date of Lease, Landlord may substitute for the Premises upon the consent of Tenant (not to be unreasonably withheld, conditioned or delayed) as to the physical condition thereof, other premises in the Building, the Project or adjacent property in Emeryville owned or controlled by Landlord or an Affiliate of Landlord (the “New Premises”), in which event the New Premises shall be deemed to be the Premises for all purposes under this Lease, provided that (i) the New Premises shall be substantially similar to the Premises in area and configuration; (ii) if Tenant is then occupying the Premises, Landlord shall pay the actual and reasonable expenses of physically moving Tenant, its property and equipment to the New Premises; (iii) Landlord shall give Tenant not less than sixty (60) days’ prior written notice of such substitution; and (iv) Landlord, at its expense, shall improve the New Premises with improvements substantially similar to those in the Premises at the time of such substitution, if the Premises are then improved. Tenant shall not have the right to refuse to relocate based upon any disruption to its business operations, provided that Landlord makes commercially reasonable efforts to minimize any such disruption.

 

62


ARTICLE 22

REAL ESTATE BROKERS

Tenant and Landlord each represents that, except for the broker(s) listed in Section 1.1, Tenant has not dealt with any real estate broker, sales person, or finder in connection with this Lease, and no such person initiated or participated in the negotiation of this Lease, or showed the Premises to Tenant. The terms of this Lease have been negotiated based on this being a direct transaction between Tenant and Landlord, and neither party has any obligation to pay a leasing commission to a broker representing Tenant or Landlord. Tenant and Landlord hereby agree to indemnify, protect, defend and hold the other party and the Indemnitees and Tenant Indemnitees as applicable, harmless from and against any and all liabilities and claims for commissions and fees arising out of a breach of the foregoing representation, as well as from any claim or claims for any commission or fee by any broker or other party claiming to represent Tenant or Landlord in connection with any future extensions or renewals of the Term. Landlord agrees to pay any commission to which the brokers listed in Section 1.1 are entitled in connection with this Lease pursuant to Landlord’s written agreement with such broker.

ARTICLE 23

MORTGAGEE PROTECTION

23.1    SUBORDINATION AND ATTORNMENT

(a)    Subject to Tenant’s rights under Section 23.1(b) below, this Lease is and shall be expressly subject and subordinate at all times to (i) any ground or underlying lease of the Real Property, now or hereafter existing, and all amendments, extensions, renewals and modifications to any such lease, and (ii) the lien of any mortgage or trust deed now or hereafter encumbering fee title to the Real Property and/or the leasehold estate under any such lease, and all amendments, extensions, renewals, replacements and modifications of such mortgage or trust deed and/or the obligation secured thereby, unless such ground lease or ground lessor, or mortgage, trust deed or Mortgagee, expressly provides or elects that this Lease shall be superior to such lease or mortgage or trust deed. If any such mortgage or trust deed is foreclosed (including any sale of the Real Property pursuant to a power of sale), or if any such lease is terminated, upon request of the Mortgagee or ground lessor, as the case may be, subject to compliance and in accordance with Tenant’s rights under Section 23.1(b) below, Tenant shall attorn to the purchaser at the foreclosure sale or to the ground lessor under such lease, as the case may be, provided, however, that such purchaser or ground lessor shall not be (i) bound by any payment of Rent for more than one month in advance except payments in the nature of security for the performance by Tenant of its obligations under this Lease; (ii) subject to any offset, defense or damages arising out of a default of any obligations of any preceding landlord, including Landlord; or (iii) bound by any amendment or modification of this Lease made without the written consent of the Mortgagee or ground lessor; or (iv) liable for any security deposits not actually received in cash by such purchaser or ground lessor. Upon request by such successor in interest, Tenant shall execute and deliver reasonable instruments confirming the attornment provided for herein. The terms of this paragraph shall survive any termination of this Lease by reason of foreclosure.

(b)    Tenant’s obligation to subordinate to any Mortgagee shall be conditioned on Landlord, at its sole cost and expense, causing such Mortgagee to sign and deliver to Tenant a

 

63


non-disturbance agreement in substantially the form attached as Exhibit D hereto (the “SNDA”); provided, however, that (i) delivery of a fully executed SNDA by such Mortgagee shall be deemed satisfaction of the condition set forth in this Section 23.1(b), and (ii) Tenant shall be responsible for its own attorney’s fees in connection with the SNDA.

23.2    MORTGAGEE PROTECTION

Tenant agrees to give any Mortgagee or ground lessor, by registered or certified mail, a copy of any notice of default served upon Landlord by Tenant, provided that prior to such notice Tenant has received notice (by way of service on Tenant of a copy of an assignment of rents and leases, or otherwise) of the address of such Mortgagee or ground lessor. Tenant further agrees that if Landlord shall have failed to cure such default within the time provided for in this Lease, then the Mortgagee or ground lessor shall have an additional thirty (30) days after receipt of notice thereof within which to cure such default or if such default cannot be cured within that time, then such additional notice time as may be necessary, if, within such thirty (30) days, any Mortgagee or ground lessor has commenced and is diligently pursuing the remedies necessary to cure such default (including commencement of foreclosure proceedings or other proceedings to acquire possession of the Real Property, if necessary to effect such cure). Such period of time shall be extended by any period within which such Mortgagee or ground lessor is prevented from commencing or pursuing such foreclosure proceedings or other proceedings to acquire possession of the Real Property by reason of Landlord’s bankruptcy. Until the time allowed as aforesaid for Mortgagee or ground lessor to cure such defaults has expired without cure, Tenant shall have no right to, and shall not, terminate this Lease on account of default. This Lease may not be modified or amended so as to reduce the Rent or shorten the Term, or so as to adversely affect in any other respect to any material extent the rights of Landlord, nor shall this Lease be canceled or surrendered, without the prior written consent, in each instance, of the ground lessor or the Mortgagee.

ARTICLE 24

NOTICES

(a)    All notices, demands or requests provided for or permitted to be given pursuant to this Lease must be in writing and shall be personally delivered, sent by Federal Express or other reputable overnight courier service, or mailed by first class, registered or certified United States mail, return receipt requested, postage prepaid.

(b)    All notices, demands or requests to be sent pursuant to this Lease shall be deemed to have been properly given or served by delivering or sending the same in accordance with this Section, addressed to the parties hereto at their respective addresses listed in Section 1.1.

(c)    Notices, demands or requests sent by mail or overnight courier service as described above shall be effective upon deposit in the mail or with such courier service. However, except with respect to a notice given under Code of Civil Procedure Section 1161 et seq., the time period in which a response to any such notice, demand or request must be given shall commence to run from (i) in the case of delivery by mail, the date of receipt on the return receipt of the notice, demand or request by the addressee thereof, or (ii) in the case of delivery by Federal Express or other overnight courier service, the date of acceptance of delivery by an employee, officer, director

 

64


or partner of Landlord or Tenant. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given, as indicated by advice from Federal Express or other overnight courier service or by mail return receipt, shall be deemed to be receipt of notice, demand or request sent. Notices may also be served by personal service upon any officer, director or partner of Landlord or Tenant, and shall be effective upon such service.

(d)    By giving to the other party at least thirty (30) days written notice thereof, either party shall have the right from time to time during the term of this Lease to change their respective addresses for notices, statements, demands and requests, provided such new address shall be within the United States of America.

ARTICLE 25

FURNITURE, FIXTURES AND EQUIPMENT

During the Term, at no charge to Tenant, Tenant shall be permitted to use the existing office and laboratory furniture, fixtures and equipment located in the Premises as of the Commencement Date and described in more particular detail in Exhibit E attached hereto (the “FF&E”). Tenant shall accept the FF&E in its current “AS-IS” condition and “WITH ALL FAULTS”. Landlord specifically disclaims all express or implied warranties regarding the existence or condition of, such FF&E, including without limitation the implied warranties of merchantability and suitability for a particular purpose. Tenant shall use the FF&E only for the purposes for which such FF&E is intended and shall be responsible for the proper maintenance, care and repair of the FF&E, at Tenant’s sole cost and expense. Upon the expiration or earlier termination of this Lease, title to the FF&E shall pass to Tenant (without any warranty or representation whatsoever), and Tenant shall remove the FF&E from the Premises in accordance with Section 12.1 of this Lease.

ARTICLE 26

MISCELLANEOUS

26.1    LATE CHARGES

(a)    All payments required hereunder (other than the Monthly Base Rent, Rent Adjustments, and Rent Adjustment Deposits, which shall be due as hereinbefore provided) to Landlord shall be paid within ten (10) business days after Landlord’s demand therefor. All such amounts (including Monthly Base Rent, Rent Adjustments, and Rent Adjustment Deposits) not paid when due shall bear interest from the date due until the date paid at the Default Rate in effect on the date such payment was due.

(b)    In the event Tenant is more than five (5) business days late in paying any installment of Rent due under this Lease, Tenant shall pay Landlord a late charge equal to two percent (2%) of the delinquent installment of Rent. The parties agree that (i) such delinquency will cause Landlord to incur costs and expenses not contemplated herein, the exact amount of which will be difficult to calculate, including the cost and expense that will be incurred by Landlord in processing each delinquent payment of rent by Tenant, (ii) the amount of such late charge represents a reasonable estimate of such costs and expenses and that such late charge shall be paid to Landlord for each delinquent payment in addition to all Rent otherwise due hereunder.

 

65


The parties further agree that the payment of late charges and the payment of interest provided for in subparagraph (a) above are distinct and separate from one another in that the payment of interest is to compensate Landlord for its inability to use the money improperly withheld by Tenant, while the payment of late charges is to compensate Landlord for its additional administrative expenses in handling and processing delinquent payments.

(c)    Payment of interest at the Default Rate and/or of late charges shall not excuse or cure any Default by Tenant under this Lease, nor shall the foregoing provisions of this Article or any such payments prevent Landlord from exercising any right or remedy available to Landlord upon Tenant’s failure to pay Rent when due, including the right to terminate this Lease.

26.2    NO JURY TRIAL; VENUE; JURISDICTION

To the fullest extent permitted by Laws, each party hereto (which includes any assignee, successor, heir or personal representative of a party) shall not seek a jury trial, hereby waives trial by jury, and hereby further waives any objection to venue in the County in which the Project is located, and agrees and consents to personal jurisdiction of the courts of the State of California, in any action or proceeding or counterclaim brought by any party hereto against the other on any matter whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, Tenant’s use or occupancy of the Premises, or any claim of injury or damage, or the enforcement of any remedy under any statute, emergency or otherwise, whether any of the foregoing is based on this Lease or on tort law. No party will seek to consolidate any such action in which a jury has been waived with any other action in which a jury trial cannot or has not been waived. It is the intention of the parties that these provisions shall be subject to no exceptions. The provisions of this Section shall survive the expiration or earlier termination of this Lease.

26.3    NO DISCRIMINATION

Tenant agrees for Tenant and Tenant’s heirs, executors, administrators, successors and assigns and all persons claiming under or through Tenant, and this Lease is made and accepted upon and subject to the following conditions: that there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry (whether in the leasing, subleasing, transferring, use, occupancy, tenure or enjoyment of the Premises or otherwise) nor shall Tenant or any person claiming under or through Tenant establish or permit any such practice or practices of discrimination or segregation with reference to the use or occupancy of the Premises by Tenant or any person claiming through or under Tenant.

26.4    FINANCIAL STATEMENTS

Within ten (10) business days after written request from Landlord from time to time during the Term, Tenant shall provide Landlord with the financial statements most recently prepared by Tenant’s independent accountant, certified as correct by such accountant or by an authorized officer of Tenant or otherwise prepared in accordance with generally accepted accounting principles consistently applied, setting forth Tenant’s financial condition and net worth for the most recent quarter, including balance sheets and statements of profits and losses. Landlord shall keep such financial information confidential and shall only disclose such information to

 

66


Landlord’s lenders, consultants, purchasers or investors, or other agents (who shall be subject to the same confidentiality obligations) on a need to know basis in connection with the administration of this Lease.

26.5    OPTION

This Lease shall not become effective as a lease or otherwise until executed and delivered by both Landlord and Tenant. The submission of this Lease to Tenant does not constitute a reservation of or option for the Premises, but when executed by Tenant and delivered to Landlord, this Lease shall constitute an irrevocable offer by Tenant in effect for fifteen (15) days to lease the Premises on the terms and conditions herein contained.

26.6    TENANT AUTHORITY

Tenant represents and warrants to Landlord that it has full authority and power to enter into and perform its obligations under this Lease, that the person executing this Lease is fully empowered to do so, and that no consent or authorization is necessary from any third party. Landlord may request that Tenant provide Landlord evidence of Tenant’s authority.

26.7    ENTIRE AGREEMENT

This Lease, the Exhibits, and Riders attached hereto contain the entire agreement between Landlord and Tenant concerning the Premises and there are no other agreements, either oral or written, and no other representations or statements, either oral or written, on which Tenant has relied. This Lease shall not be modified except by a writing executed by Landlord and Tenant.

26.8    MODIFICATION OF LEASE FOR BENEFIT OF MORTGAGEE

If Mortgagee of Landlord requires a modification of this Lease which shall not result in any increased cost or expense to Tenant or in any other substantial and adverse change in the rights and obligations of Tenant hereunder, then Tenant agrees that this Lease may be so modified.

26.9    EXCULPATION

Tenant agrees, on its behalf and on behalf of its successors and assigns, that any liability or obligation under this Lease shall only be enforced against Landlord’s equity interest in the Property up to a maximum of Five Million Dollars ($5,000,000.00) and in no event against any other assets of Landlord, or Landlord’s members, officers, directors or partners, and that any liability of Landlord with respect to this Lease shall be so limited and Tenant shall not be entitled to any judgment in excess of such amount. Notwithstanding anything to the contrary contained herein, in no event shall Landlord be liable to Tenant for consequential, punitive or special damages with respect to this Lease.

26.10    ACCORD AND SATISFACTION

No payment by Tenant or receipt by Landlord of a lesser amount than any installment or payment of Rent due shall be deemed to be other than on account of the amount due, and no endorsement or statement on any check or any letter accompanying any check or payment of Rent

 

67


shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment or payment of Rent or pursue any other remedies available to Landlord. No receipt of money by Landlord from Tenant after the termination of this Lease or Tenant’s right of possession of the Premises shall reinstate, continue or extend the Term. Receipt or acceptance of payment from anyone other than Tenant, including an assignee of Tenant, is not a waiver of any breach of Article 10, and Landlord may accept such payment on account of the amount due without prejudice to Landlord’s right to pursue any remedies available to Landlord.

26.11    LANDLORDS OBLIGATIONS ON SALE OF BUILDING

In the event of any sale or other transfer of the Building, Landlord shall be entirely freed and relieved of all agreements and obligations of Landlord hereunder accruing or to be performed after the date of such sale or transfer, and any remaining liability of Landlord with respect to this Lease shall be limited to the dollar amount specified in Section 26.9 and Tenant shall not be entitled to any judgment in excess of such amount. Landlord shall have the right to assign this Lease to an entity comprised of the principals of Landlord or any Landlord Affiliate. Upon such assignment and assumption of the obligations of Landlord hereunder, Landlord shall be entirely freed and relieved of all obligations hereunder.

26.12    BINDING EFFECT

Subject to the provisions of Article 10, this Lease shall be binding upon and inure to the benefit of Landlord and Tenant and their respective heirs, legal representatives, successors and permitted assigns.

26.13    CAPTIONS

The Article and Section captions in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope or intent of such Articles and Sections.

26.14    TIME; APPLICABLE LAW; CONSTRUCTION

Time is of the essence of this Lease and each and all of its provisions. This Lease shall be construed in accordance with the Laws of the State of California. If more than one person signs this Lease as Tenant, the obligations hereunder imposed shall be joint and several. If any term, covenant or condition of this Lease or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Lease, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby and each item, covenant or condition of this Lease shall be valid and be enforced to the fullest extent permitted by Law. Wherever the term “including” or “includes” is used in this Lease, it shall have the same meaning as if followed by the phrase “but not limited to”. The language in all parts of this Lease shall be construed according to its normal and usual meaning and not strictly for or against either Landlord or Tenant.

 

68


26.15    ABANDONMENT

In the event Tenant vacates or abandons the Premises but is otherwise in compliance with all the terms, covenants and conditions of this Lease, Landlord shall (i) have the right to enter into the Premises in order to show the space to prospective tenants, (ii) have the right to reduce the services provided to Tenant pursuant to the terms of this Lease to such levels as Landlord reasonably determines to be adequate services for an unoccupied premises, and (iii) during the last six (6) months of the Term, have the right to prepare the Premises for occupancy by another tenant upon the end of the Term. Tenant expressly acknowledges that in the absence of written notice pursuant to Section 11.2(b) or pursuant to California Civil Code Section 1951.3 terminating Tenant’s right to possession, none of the foregoing acts of Landlord or any other act of Landlord shall constitute a termination of Tenant’s right to possession or an acceptance of Tenant’s surrender of the Premises, and this Lease shall continue in effect.

26.16    LANDLORDS RIGHT TO PERFORM TENANTS DUTIES

If Tenant fails timely to perform any of its duties under this Lease within the notice and cure period (if any) specified in this Lease, Landlord shall have the right (but not the obligation), to perform such duty on behalf and at the expense of Tenant with at least ten (10) business days’ prior notice to Tenant, and all sums expended or expenses incurred by Landlord in performing such duty shall be deemed to be additional Rent under this Lease and shall be due and payable upon demand by Landlord.

26.17    SECURITY SYSTEM

Landlord, in its sole and absolute discretion, shall install certain card key access and video camera systems respecting certain main entry points of the Building. Subject to the foregoing, Landlord shall not be obligated to provide or maintain any security patrol or security system. Landlord shall not be responsible for the quality of any such patrol or system which may be provided hereunder or for damage or injury to Tenant, its employees, invitees or others due to the failure, action or inaction of such patrol or system.

26.18    NO LIGHT, AIR OR VIEW EASEMENTS

Any diminution or shutting off of light, air or view by any structure which may be erected on lands of or adjacent to the Project shall in no way affect this Lease or impose any liability on Landlord.

26.19    RECORDATION

Neither this Lease, nor any notice nor memorandum regarding the terms hereof, shall be recorded by Tenant. Any such unauthorized recording shall be a Default for which there shall be no cure or grace period. Tenant agrees to execute and acknowledge, at the request of Landlord, a memorandum of this Lease, in recordable form.

 

69


26.20    SURVIVAL

The waivers of the right of jury trial, the other waivers of claims or rights, the releases and the obligations of Tenant under this Lease to indemnify, protect, defend and hold harmless Landlord and/or Indemnitees shall survive the expiration or termination of this Lease, and so shall all other obligations or agreements which by their terms survive expiration or termination of this Lease.

26.21    OFAC

(a)    Tenant hereby represents, warrants and covenants to Landlord, either that (i) Tenant is regulated by the SEC, FINRA or the Federal Reserve (a “Regulated Entity”) or (ii) neither Tenant nor any person or entity that directly or indirectly (A) controls Tenant or (B) has an ownership interest in Tenant of twenty-five percent (25%) or more, appears on the list of Specially Designated Nationals and Blocked Persons (“OFAC List”) published by the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of the Treasury.

(b)    If, in connection with this Lease, there is one or more Guarantors of Tenant’s obligations under this Lease, then Tenant further represents, warrants and covenants either that (i) any such Guarantor is a Regulated Entity or (ii) neither Guarantor nor any person or entity that directly or indirectly (A) controls such Guarantor or (B) has an ownership interest in such Guarantor of twenty-five percent (25%) or more, appears on the OFAC List.

(c)    Tenant covenants that during the term of this Lease to provide to Landlord information reasonably requested by Landlord including without limitation, organizational structural charts and organizational documents which Landlord may deem to be necessary (“Tenant OFAC Information”) in order for Landlord to confirm Tenant’s continuing compliance with the provisions of this Article. Tenant represents and warrants that the Tenant OFAC Information it has provided or to be provided to Landlord or Landlord’s Broker in connection with the execution of this Lease is true and complete.

(d)    Landlord advises Tenant hereby that the purpose of this Section is to provide to Landlord information and assurances to enable Landlord to comply with the Laws relating to OFAC.

(e)    Tenant acknowledges that the breach of any of the representations, warranties and/or covenants by Tenant under this Section 26.21 shall be an immediate Default under this Lease.

26.22    INSPECTION BY A CASP IN ACCORDANCE WITH CIVIL CODE SECTION 1938

Landlord discloses that to Landlord’s knowledge, neither the Building nor the Premises have undergone inspection by a Certified Access Specialist. Furthermore, pursuant to Section 1938 of the California Civil Code, Landlord notifies Tenant of the following: “A Certified Access Specialist (CASp) can inspect the subject premises and determine whether the subject premises comply with all of the applicable construction-related accessibility standards under state law. Although California state law does not require a CASp inspection of the subject premises, the commercial property owner or lessor may not prohibit the lessee or tenant from obtaining a CASp inspection of the subject premises for the occupancy or potential occupancy of the lessee or

 

70


tenant, if requested by the lessee or tenant. The parties shall mutually agree on the arrangements for the time and manner of any such CASp inspection, the payment of the costs and fees for the CASp inspection and the cost of making any repairs necessary to correct violations of construction-related accessibility standards within the Premises.” Tenant agrees that (a) Tenant may, at its option and at its sole cost, cause a CASp to inspect the Premises and determine whether the Premises complies with all of the applicable construction-related accessibility standards under California law, (b) the parties shall mutually coordinate and reasonably approve of the timing of any such CASp inspection so that Landlord may, at its option, have a representative present during such inspection, and (c) Tenant shall be solely responsible for the cost of any repairs necessary to correct violations of construction-related accessibility standards within the Premises and Building identified by any such CASp inspection, any and all such alterations and repairs within the Premises to be performed by Tenant shall be subject to Landlord’s consent and in accordance with this Lease. Landlord and Tenant hereby agree that if Tenant elects to perform a CASp inspection of the Premises, Tenant will provide written notice to Landlord, and Landlord may elect, in Landlord’s sole discretion, to retain a CASp to perform the inspection. If Landlord does not so elect, the time and manner of the CASp inspection is subject to the prior written approval of Landlord. In either event, the payment of the fee for the CASp inspection shall be borne by Tenant.

26.23    COUNTERPARTS

This Lease may be executed in any number of counterparts, each of which shall be deemed an original, but all of which, together, shall constitute one and the same instrument. Telecopied signatures or signatures transmitted by electronic mail in so-called “pdf” format or via DocuSign or similar electronic means, may be used in place of original signatures on this Lease. Landlord and Tenant intend to be bound by the signatures on the telecopied or e-mailed document, are aware that the other party will rely on the telecopied or e-mailed signatures, and hereby waive any defenses to the enforcement of the terms of this Lease based on such telecopied or e-mailed signatures. Promptly following request by either party, the other party shall provide the requesting party with original signatures on this Lease.

26.24    EXHIBITS AND RIDERS

All exhibits, riders and/or addenda referred to in this Lease as an exhibit, rider, or addenda hereto, or attached hereto, are hereby incorporated into and made a part of this Lease.

[Signatures on Following Page]

 

71


IN WITNESS WHEREOF, this Lease has been executed as of the date set forth in Section 1.1 hereof.

 

TENANT:
BERKELEY LIGHTS, INC.
a Delaware corporation
By:  

/s/ Stuart Merkadeau

Name:   Stuart L. Merkadeau
Its:   General Counsel & Corp. Sec.
By:  

                                                                           

Name  

                                          

Its:  

                                          

LANDLORD:
EMERY STATION OFFICE II, LLC,
a California limited liability company
By:      Emery Station Associates II, LLC,
     its Managing Member
     By:      Wareham-NZL, LLC,
          its Managing Member
          By:     

/s/ Richard Robbins

               Richard K. Robbins
               Its Manager
 

 

72


EXHIBIT A

OUTLINE OF PREMISES

 

LOGO

 

A-1

ARTICLE 1


EXHIBIT B

WORKLETTER AGREEMENT

(Tenant Build / Allowance)

THIS WORK AGREEMENT (this “Work Agreement”) is attached to and made a part of that certain Lease (the “Lease”) between EMERY STATION OFFICE II, LLC, a California limited liability company (“Landlord”), and BERKELEY LIGHTS, INC., a Delaware corporation (“Tenant”). All capitalized terms used but not defined herein shall have the respective meanings given such terms in the Lease. This Work Agreement sets forth the terms and conditions relating to the construction of Tenant Work (defined below) in the Premises.

1.    Allowance; Tenant Work.

(a)    Allowance. Tenant shall be entitled to the Tenant Improvement Allowance specified in Section 1.1 of the Lease for the costs relating to the design, permitting and construction of Tenant’s improvements which are permanently affixed to the Premises (“Tenant Work”). Tenant shall be entitled to use the Amortized Tenant Improvement Allowance, if Tenant elects to obtain same), only for the BSL-1/BSL-2 Lab Cooling Improvement Costs. The Amortized Tenant Improvement Allowance, if any, shall be subject to the same disbursement requirements as apply to the Tenant Improvement Allowance under this Work Agreement, and the BSL-1/BSL-2 Lab Cooling Improvements shall be considered part of the Tenant Work.

(b)    Outside Disbursement Date. In no event will Landlord be obligated to make disbursements pursuant to this Work Agreement in a total amount which exceeds the Tenant Improvement Allowance. Tenant must complete all Tenant Work and have submitted Payment Request Supporting Documentation (defined below) for such work no later than the date that is twelve (12) months after the Commencement Date in order to be entitled to receive the Tenant Improvement Allowance for such work.

(c)    Disbursement of the Tenant Improvement Allowance.

(i)    Tenant Improvement Allowance Items. Except as otherwise set forth in this Work Agreement, the Tenant Improvement Allowance shall be disbursed by Landlord only for the following items and costs (collectively the “Tenant Improvement Allowance Items”):

(A)    Payment of the fees of the Architect and the Building Consultants (as those terms are defined below) and payment of fees and costs reasonably incurred by Landlord for the review of the Construction Drawings (defined below) by Landlord or by Landlord’s third party consultants;

(B)    The payment of plan check, permit and license fees relating to the Tenant Work;

(C)    The cost of construction of the Tenant Work, including, without limitation, after hours charges, testing and inspection costs, freight elevator usage, trash removal costs, and contractors’ fees and general conditions;

 

B-1


(D)    The cost of any changes to the Building when such changes are required by the Construction Drawings, such cost to include all direct architectural and/or engineering fees and expenses incurred in connection therewith;

(E)    The cost of any changes to the Construction Drawings (defined below) or Tenant Work required by applicable building codes (collectively, “Code”); and

(F)    The Coordination Fee (defined below).

(ii)    Disbursement of Tenant Improvement Allowance. During the design and construction of the Tenant Work, Landlord shall make monthly disbursements of the Tenant Improvement Allowance to reimburse Tenant for Tenant Improvement Allowance Items and shall authorize the release of funds as follows, and otherwise in accordance with Landlord’s standard disbursement process.

(A)    On or before the fifth (5th) day of each calendar month (or such other date as Landlord may designate), Tenant shall deliver to Landlord: (1) a request for payment from Contractor (defined below) approved by Tenant and the Architect (hereafter defined), in a commercially reasonable form to be provided or approved in advance by Landlord, including a schedule of values and showing the percentage of completion, by trade, of the Tenant Work, which details the portion of the work completed and the portion not completed; (2) invoices from all of Tenant’s Agents (defined below) for labor rendered and materials delivered to the Premises; (3) executed conditional mechanic’s lien releases from all of Tenant’s Agents who have lien rights with respect to the subject request for payment (along with unconditional mechanics’ lien releases with respect to payments made pursuant to Tenant’s prior submission hereunder) in compliance with all applicable laws; (4) a copy of the check(s) which Tenant issued to pay the requested sums to Tenant’s Agents; and (5) all other information reasonably requested by Landlord (collectively, the “Payment Request Supporting Documentation”).

(B)    Within forty (40) days after Tenant’s delivery to Landlord of all Payment Request Supporting Documentation, Landlord shall deliver to Tenant payment in an amount equal to the lesser of: (x) the amount so requested by Tenant, as set forth above, less (1) the applicable Over-Tenant Improvement Allowance Amount (defined in Section 3.2(a) below and (2) a ten percent (10%) retention (the aggregate amount of such retentions to be known as the “Final Retention”), and (y) the balance of any remaining available portion of the Tenant Improvement Allowance (not including the Final Retention), provided that if Landlord, in good faith, disputes any item in a request for payment based on non-compliance of any work with the Approved Working Drawings (defined below) or due to any substandard work and delivers a written objection to such item setting forth with reasonable particularity Landlord’s reasons for its dispute (a “Draw Dispute Notice”) within ten (10) business days following Tenant’s submission of its Payment Request Supporting Documentation, Landlord may deduct the amount of such disputed item from the payment. Landlord and Tenant shall, in good faith, endeavor to diligently resolve any such dispute. Landlord’s payment of such amounts shall not be deemed Landlord’s approval or acceptance of the work furnished or materials supplied as set forth in Tenant’s payment request.

(C)    Subject to the provisions of this Work Agreement, following the final completion of construction of the Tenant Work, Landlord shall deliver to Tenant a check

 

B-2


made payable to Tenant, or a check or checks made payable to another party or parties as reasonably requested by Tenant, in the amount of the Final Retention, provided that (1) Tenant delivers to Landlord properly executed unconditional mechanics’ lien releases from all of Tenant’s Agents in compliance with all applicable laws, as reasonably determined by Landlord; (2) Landlord has determined in good faith that no substandard work exists which adversely affects the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the structure or exterior appearance of the Building; (3) Architect delivers to Landlord a certificate, in a form reasonably acceptable to Landlord, certifying that the construction of the Tenant Work has been finally completed; (4) Tenant supplies Landlord with evidence that all governmental approvals required for an occupant to legally occupy the Premises has been obtained; and (5) Tenant has fulfilled its Completion Obligations (defined below) and has otherwise complied with Landlord’s standard “close-out” requirements regarding city approvals, closeout tasks, closeout documentation regarding the general contractor, financial close-out matters, and Tenant’s vendors.

2.    Construction Drawings

(a)    Selection of Architect; Construction Drawings.

(i)    Tenant shall retain an architect approved in writing, in advance by Landlord, such approval not to be unreasonably withheld, conditioned or delayed (the “Architect”) to prepare the Construction Drawings. Tenant shall retain engineering consultants approved in writing, in advance by Landlord, such approval not to be unreasonably withheld, conditioned or delayed (the “Building Consultants”) to prepare all plans and engineering working drawings and perform all work relating to mechanical, electrical and plumbing (“MEP”), HVAC/Air Balancing, life-safety, structural, sprinkler and riser work.

(ii)    The plans and drawings to be prepared by Architect and the Building Consultants hereunder (i.e., both the Space Plan and the Working Drawings, as each term is defined below) shall be known collectively as the “Construction Drawings.” All Construction Drawings shall comply with the drawing format and specifications determined or approved by Landlord and shall be subject to Landlord’s prior written approval, not to be unreasonably withheld, conditioned or delayed. All MEP drawings must be fully engineered or prepared on a “design-build-assist” basis with a Landlord-approved MEP basis of design (“BOD”), as prepared by an approved MEP engineer consultant. The MEP drawings cannot be prepared on a strictly “design-build” basis. All fire protection work must be developed to FM Global standards. Landlord’s review of the Construction Drawings shall be for its sole purpose and shall not obligate Landlord to review the same, for quality, design, Code compliance or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord’s space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings.

(b)    Space Plan. Tenant shall supply Landlord for Landlord’s review and approval with four (4) copies signed by Tenant of its space plan for the Premises (“Space Plan”) before any architectural working drawings or engineering drawings have been commenced. The Space Plan

 

B-3


shall include a layout and designation of all laboratory facilities, offices, rooms and other partitioning, their intended use, and equipment to be contained therein. Landlord and Tenant acknowledge and agree that the Tenant Improvements shall not result in less than twenty percent (20%) of the Premises being comprised of BSL-1/BSL-2 Lab space. Landlord may request clarification or more specific drawings for special use items not included in the Space Plan. Landlord shall advise Tenant within ten (10) business days after Landlord’s receipt of the Space Plan (or, if applicable, such additional information requested by Landlord pursuant to the provisions of the immediately preceding sentence) if the same is approved or is unsatisfactory or incomplete in any respect. Upon any disapproval by Landlord, Tenant shall promptly cause the Space Plan to be revised to correct any deficiencies or other matters Landlord may reasonably require.

(c)    Working Drawings. After the Space Plan has been approved by Landlord, Tenant shall supply the Architect and the Building Consultants with a complete listing of standard and non-standard equipment and specifications, including, without limitation, B.T.U. calculations, electrical requirements and special electrical receptacle requirements, to enable the Architect and the Building Consultants to complete the Working Drawings and shall cause the Architect and the Engineers to promptly complete the architectural and engineering drawings, and Architect shall compile a fully coordinated set of drawings, including but not limited to architectural, structural, mechanical, electrical, plumbing, fire sprinkler and life safety in a form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the “Working Drawings”) and shall submit the same to Landlord for Landlord’s review and approval. Tenant shall supply Landlord with four (4) copies signed by Tenant of the Working Drawings. Landlord shall advise Tenant within ten (10) business days after Landlord’s receipt of the Working Drawings if Landlord, in good faith, determines that the same are approved or are unsatisfactory or incomplete. If Tenant is so advised, Tenant shall promptly revise the Working Drawings to correct any deficiencies or other matters Landlord may reasonably require.

(d)    Landlord’s Approval. Tenant acknowledges that it shall be deemed reasonable for Landlord to disapprove the Space Plan and any subsequent Working Drawings unless, at a minimum, the same are prepared on the basis that the Tenant Work as specified and designed comply with the requirements of the Project’s Sustainability Practices (if any) and Tenant is strongly encouraged to complete the Tenant Work in a manner sufficient to achieve the applicable Green Building Standards. Additionally, Landlord’s approval of any matter under this Work Agreement may be withheld if Landlord reasonably determines that the same would violate any provision of the Lease or this Work Agreement or would adversely affect the mechanical, electrical, plumbing, heating, ventilating and air conditioning, life-safety or other systems of the Building, the curtain wall of the Building, the structure or exterior appearance of the Building.

3.    Construction of the Tenant Work

(a)    Tenant’s Selection of Contractors.

(i)    The Contractor. Tenant shall retain a general contractor approved in writing, in advance by Landlord, such approval not to be unreasonably withheld, conditioned or delayed to construct the Tenant Work (“Contractor”).

 

B-4


(ii)    Tenant’s Agents. All subcontractors, laborers, materialmen, and suppliers used by Tenant (such subcontractors, laborers, materialmen, and suppliers, and the Contractor to be known collectively as “Tenant’s Agents”) must be approved in writing by Landlord, in Landlord’s sole discretion, provided that Landlord will require Tenant to retain the Building Consultants. All of Tenant’s Agents shall be licensed in the State of California and capable of being bonded. Notwithstanding anything herein to the contrary, in connection with Tenant’s construction of the Tenant Work, any of Tenant’s Agents that are (A) to be reimbursed to Tenant through the Tenant Improvement Allowance, and/or (B) involved in principal construction trades, shall be union-affiliated and in compliance with all then existing master labor agreements.

(b)    Construction of Tenant Work by Tenant’s Agents.

(i)    Final Costs. Prior to the commencement of the construction of the Tenant Work, Tenant shall provide Landlord with a schedule of values consisting of a detailed breakdown, by trade, of the final costs to be incurred or which have been incurred in connection with the design and construction of the Tenant Work (the “Final Costs”). Prior to the commencement of construction of the Tenant Work, Landlord and Tenant shall identify the amount (the “Over-Allowance Amount”) equal to the difference between the amount of the Final Costs and the amount of the Tenant Improvement Allowance (less any portion thereof already disbursed by Landlord, or in the process of being disbursed by Landlord, on or before the commencement of construction of the Tenant Work), and Landlord will reimburse Tenant on a monthly basis, as described in Section 1.2(b)(ii) above, for a percentage of each amount requested by the Contractor or otherwise to be disbursed under this Work Agreement, which percentage shall be equal to the Tenant Improvement Allowance divided by the amount of the Final Costs (after deducting from the Final Costs any amounts expended in connection with the preparation of the Construction Drawings, and the cost of all other Tenant Improvement Allowance Items incurred prior to the commencement of construction of the Tenant Work), and Tenant shall be solely responsible for any Over-Allowance Amount. If, after the Final Costs have been initially determined, the costs relating to the design and construction of the Tenant Work shall change, any additional costs for such design and construction in excess of the Final Costs shall be added to the Over-Allowance Amount and the Final Costs, and Landlord’s reimbursement percentage, shall be recalculated in accordance with the terms of the immediately preceding sentence. Notwithstanding anything set forth herein to the contrary, construction of the Tenant Work shall not commence until Tenant has procured and delivered to Landlord a copy of all Permits for the applicable Tenant Work.

(ii)    Construction Requirements.

(A)    Landlord’s General Conditions for Tenant’s Agents and Tenant Improvement Work. The Tenant Work shall be constructed in strict accordance with the Approved Working Drawings and Landlord’s then-current published construction guidelines. Tenant shall pay an oversight and supervisory fee (the “Coordination Fee”) to Landlord in an amount equal to one and one-half percent (1.5%) of the Final Costs.

(B)    Indemnity. Tenant’s indemnity of Landlord as set forth in the Lease shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to any act or omission of Tenant or Tenant’s Agents, or anyone directly or indirectly employed by any of them, or in connection with Tenant’s non-payment of any amount arising out

 

B-5


of the Tenant Work and/or Tenant’s disapproval of all or any portion of any request for payment. Such indemnity by Tenant, as set forth in the Lease, shall also apply with respect to any and all costs, losses, damages, injuries and liabilities related in any way to Landlord’s performance of any ministerial acts reasonably necessary (1) to permit Tenant to complete the Tenant Work, and (2) to enable Tenant to obtain any related building permit or certificate of occupancy.

(C)    Requirements of Tenant’s Agents. Each of Tenant’s Agents shall guarantee to Tenant and for the benefit of Landlord that the portion of the Tenant Work for which it is responsible shall be free from any defects in workmanship and materials for a period of not less than one (1) year from the date of completion thereof. Each of Tenant’s Agents shall be responsible for the replacement or repair, without additional charge, of all work done or furnished in accordance with its contract that shall become defective within one (1) year after the completion of the work performed by such contractor or subcontractor. The correction of such work shall include, without additional charge, all additional expenses and damages incurred in connection with the removal or replacement of all or any part of the Tenant Work, and/or the Building and/or Common Areas that are damaged or disturbed thereby. All such warranties or guarantees as to materials or workmanship of or with respect to the Tenant Work shall be contained in the Tenant’s construction contract or subcontracts and shall be written such that such guarantees or warranties shall inure to the benefit of both Landlord and Tenant, as their respective interests may appear, and can be directly enforced by either. Tenant covenants to give to Landlord any assignment or other assurances as may be necessary to effect such right of direct enforcement.

(iii)    Insurance Requirements.

(A)    General Coverages. All of Tenant’s Agents shall carry employer’s liability and worker’s compensation insurance covering all of their respective employees, and shall also carry commercial general liability insurance, including personal and bodily injury, property damage and completed operations liability, all with limits, in form and with companies as are required to be carried by Tenant as set forth in the Lease.

(B)    Special Coverages. Tenant or Contractor shall carry “Builder’s All Risk” insurance in an amount approved by Landlord covering the construction of the Tenant Work, and such other insurance as Landlord may require, it being understood and agreed that the Tenant Work shall be insured by Tenant pursuant to the Lease immediately upon completion thereof. Such insurance shall be in amounts and shall include such extended coverage endorsements as may be reasonably required by Landlord, and shall be in form and with companies as are required to be carried by Tenant as set forth in the Lease.

(C)    General Terms. Certificates for all of the foregoing insurance coverage shall be delivered to Landlord before the commencement of construction of the Tenant Work and before the Contractor’s equipment is moved onto the site. All such policies of insurance must contain a provision that the company writing said policy will endeavor to give Landlord thirty (30) days’ prior written notice of any cancellation of such insurance. In the event that the Tenant Work are damaged by any cause during the course of the construction thereof, Tenant shall immediately repair the same at Tenant’s sole cost and expense. Tenant’s Agents shall maintain all of the foregoing insurance coverage in force until the Tenant Work are fully completed and accepted by Landlord, except for any Products and Completed Operations Coverage insurance

 

B-6


required by Landlord, which is to be maintained for one (1) year following completion of the work and acceptance by Landlord and Tenant. All policies carried hereunder shall insure Landlord, Wareham Property Group as Landlord’s manager, and Tenant, as their interests may appear, as well as Tenant’s Agents. All insurance, except Workers’ Compensation, maintained by Tenant’s Agents shall preclude subrogation claims by the insurer against anyone insured thereunder. Such insurance shall provide that it is primary insurance as respects Landlord and Tenant and that any other insurance maintained by Landlord or Tenant is excess and noncontributing with the insurance required hereunder. The requirements for the foregoing insurance shall not derogate from the provisions for indemnification of Landlord by Tenant under the Lease and/or this Work Agreement.

(iv)    Governmental Compliance. The Tenant Work shall comply in all respects with the following: (A) the Code and other federal, state, city and/or quasi-governmental laws, codes, ordinances and regulations, as each may apply according to the rulings of the controlling public official, agent or other person or entity; (B) applicable standards of the American Insurance Association (formerly, the National Board of Fire Underwriters) and the National Electrical Code; (C) building material manufacturer’s specifications, and (D) the Project’s Sustainability Practices (if any).

(v)    Inspection by Landlord. Prior to the completion of the Tenant Work, Landlord shall have the right to inspect the same at all times, provided however, that Landlord’s failure to inspect the Tenant Work shall in no event constitute a waiver of any of Landlord’s rights hereunder nor shall Landlord’s inspection of the Tenant Work constitute Landlord’s approval of the same. Should Landlord disapprove any portion of the Tenant Work, Landlord shall notify Tenant in writing of such disapproval and shall specify the items disapproved. Any defects or deviations in, and/or disapproval by Landlord of, the Tenant Work shall be rectified by Tenant at no expense to Landlord, provided however, that in the event Landlord determines that a defect or deviation exists or disapproves of any matter in connection with any portion of the Tenant Work and such defect, deviation or matter might adversely affect the mechanical, electrical, plumbing, heating, ventilating and air conditioning or life-safety systems of the Building, the structure or exterior appearance of the Building or any other tenant’s use of such other tenant’s leased premises, Landlord may take such action as Landlord deems necessary, at Tenant’s expense and without incurring any liability on Landlord’s part, to correct any such defect, deviation and/or matter, including, without limitation, causing the cessation of performance of the construction of the Tenant Work until such time as the defect, deviation and/or matter is corrected to Landlord’s satisfaction.

(vi)    Meetings. Tenant shall hold periodic meetings at a reasonable time with the Architect and the Contractor regarding the progress of the preparation of the Construction Drawings and the construction of the Tenant Work, which meetings shall be held at a location designated or reasonably approved by Landlord, and Landlord and/or its agents shall receive prior written notice of, and shall have the right to attend, all such meetings. Upon Landlord’s request, certain of Tenant’s Agents shall attend such meetings. In addition, minutes shall be taken at all such meetings, and Landlord will be included in the distribution list for such minutes. One such meeting each month shall include the review of Contractor’s current request for payment.

 

B-7


(c)    Notice of Completion; Copy of Record Set of Plans. Within fifteen (15) days after completion of construction of the Tenant Work, Tenant shall cause a Notice of Completion to be recorded in the office of the Recorder of Alameda County and shall furnish a copy thereof to Landlord upon such recordation, and shall timely give all notices required pursuant to the California Civil Code. If Tenant fails to do so, Landlord may execute and file such Notice of Completion and give such notices on behalf of Tenant as Tenant’s agent for such purpose, at Tenant’s sole cost and expense. Within thirty (30) days following the completion of construction, (i) Tenant shall cause the Architect and Contractor (A) to update the Approved Working Drawings as necessary to reflect all changes made to the Approved Working Drawings during the course of construction, (B) to certify to the best of their knowledge that the updated drawings are true and correct, which certification shall survive the expiration or termination of the Lease, and (C) to deliver to Landlord such updated drawings in accordance with Landlord’s then-current CAD requirements, and (ii) Tenant shall deliver to Landlord a copy of all warranties, guaranties, and operating manuals and information relating to the improvements, equipment, and systems in the Premises. Tenant’s obligations set forth in this Section are collectively referred to as the “Completion Obligations.”

4.    Miscellaneous

(a)    Tenant’s Representative. Tenant has designated Stuart Merkadeau as its sole representative with respect to the matters set forth in this Work Agreement, until further notice to Landlord, who shall have full authority and responsibility to act on behalf of Tenant as required in this Work Agreement.

(b)    Landlord’s Representative. Landlord has designated Geoffrey Sears as its sole representative with respect to the matters set forth in this Work Agreement, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of Landlord as required in this Work Agreement.

(c)    Tenant’s Default. Notwithstanding any provision to the contrary contained in the Lease, if a Default by Tenant under the Lease (including, without limitation, this Work Agreement) has occurred at any time on or before the substantial completion of the Tenant Work, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance, and (ii) all other obligations of Landlord under the terms of this Work Agreement shall be forgiven until such time as such default is cured pursuant to the terms of the Lease.

 

B-8


EXHIBIT C

SIGNAGE

 

C-1


EXHIBIT C-1

LABORATORY RULES AND REGULATIONS

1.    Any laboratory equipment (glass and cage washers, sterilizers, centrifuges, etc.) being used during Standard Operating Hours must be properly insulated for noise to prevent interruption of other tenants’ business. Landlord reserves the right to request all equipment be insulated prior to occupancy. Should other tenants complain of noise, the laboratory tenant will be responsible for abating any noise issues, at the laboratory tenant’s sole cost.

2.    Any damages to property due to leaks from laboratory equipment will be the sole responsibility of the laboratory tenant. Should damage occur in other tenant spaces, any and all damages and clean-up will be the responsibility of the laboratory tenant.

3.    Animal activities are a recognized and necessary process in the biotech industry. Such activities may only be conducted by laboratory tenants pursuant to all the requirements of their respective lease (including any “Use” clause) and require specific, written approval by Landlord in advance. Any animal activities shall be conducted pursuant to all regulations, standards and best industry practices relating to them.

4.    The Project is a mixed-use facility, and laboratory tenants share space with office tenants. To reduce the potential interaction with office tenants and their employees and visitors with any biotech animal operations, any animal testing performed, any deliveries of animals and any equipment, foods, cleaners, etc. associated with animal activities, must be coordinated through the loading dock after hours and with the cooperation of the building management and security personnel. The laboratory tenant should make every effort to handle any deliveries relating to animal activities outside of Standard Operating Hours. The freight elevator must be used at all times, and delivery trucks should not be visible to the other tenants in the campus area. No cartons, containers or cardboard boxes bearing the nature of contents may be stored or left in common area spaces, including any garage/freight areas. Feed bags, animal carriers, and any and all other related containers must be disposed of properly and with discretion.

5.    All exterior signage relating to laboratory operations (i.e., visible to Common Areas, including corridors) must be kept to the minimum required by Laws. All signs must have Landlord’s approval prior to installation.

 

C-1-1


EXHIBIT C-2

RULES AND REGULATIONS

1.    No sidewalks, entrance, passages, courts, elevators, vestibules, stairways, corridors or halls shall be obstructed or encumbered by Tenant or used for any purpose other than ingress and egress to and from the Premises and if the Premises are situated on the ground floor of the Project, Tenant shall further, at Tenant’s own expense, keep the sidewalks and curb directly in front of the Premises clean and free from rubbish.

2.    No awning or other projection shall be attached to the outside walls or windows of the Project without the prior written consent of Landlord. No curtains, blinds, shades, drapes or screens shall be attached to or hung in, or used in connection with any window or door of the Premises, without the prior written consent of Landlord. Such awnings, projections, curtains, blinds, shades, drapes, screens and other fixtures must be of a quality, type, design, color, material and general appearance approved by Landlord, and shall be attached in the manner approved by Landlord. All lighting fixtures hung in offices or spaces along the perimeter of the Premises must be of a quality, type, design, bulb color, size and general appearance approved by Landlord.

3.    Except as provided in the Lease, no sign, advertisement, notice, lettering, decoration or other thing shall be exhibited, inscribed, painted or affixed by Tenant on any part of the outside or inside of the Premises or of the Project, without the prior written consent of Landlord. In the event of the violation of the foregoing by Tenant, Landlord may remove same without any liability, and may charge the expense incurred by such removal to Tenant.

4.    The sashes, sash doors, skylights, windows and doors that reflect or admit light or air into the halls, passageways or other public places in the Project shall not be covered or obstructed by Tenant, nor shall any bottles, parcels or other articles be placed on the window sills or in the public portions of the Project.

5.    No showcases or other articles shall be put in front of or affixed to any part of the exterior of the Project, nor placed in public portions thereof without the prior written consent of Landlord.

6.    The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, rags or other substances shall be thrown therein. All damages resulting from any misuse of the fixtures shall be borne by Tenant to the extent that Tenant or Tenant’s agents, servants, employees, contractors, visitors or licensees shall have caused the same.

7.    Tenant shall not mark, paint, drill into or in any way deface any part of the Premises or the Project. No boring, cutting or stringing of wires shall be permitted, except with the prior written consent of Landlord, and as Landlord may direct.

8.    No animal or bird of any kind shall be brought into or kept in or about the Premises or the Project, except dogs that qualify as “service animals” under the ADA.

 

C-2-1


9.    Tenant shall cooperate with Landlord’s efforts to implement the Project’s Sustainability Practices and the applicable Green Building Standards, including, but not limited to, complying with Landlord’s then-current energy saving efforts and participating in any recycling programs and occupant satisfaction and transportation surveys.

10.    Prior to leaving the Premises for the day, Tenant shall draw or lower window coverings and extinguish all lights.

11.    Tenant shall regularly conduct cleaning and janitorial activities, especially in bathrooms, kitchens and janitorial spaces, to remove mildew and prevent moist conditions and shall comply with the Project’s Sustainability Practices and Tenant is strongly encouraged to comply with the applicable Green Building Standards.

12.    Tenant shall not make, or permit to be made, any unseemly or disturbing noises or disturb or interfere with occupants of the Project, or neighboring buildings or premises, or those having business with them. Tenant shall not throw anything out of the doors, windows or skylights or down the passageways.

13.    Neither Tenant nor any of Tenant’s agents, servants, employees, contractors, visitors or licensees shall at any time bring or keep upon the Premises any flammable, combustible or explosive fluid, chemical or substance.

14.    No additional locks, bolts or mail slots of any kind shall be placed upon any of the doors or windows by Tenant, nor shall any change be made in existing locks or the mechanism thereof. Tenant must, upon the termination of the tenancy, restore to Landlord all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by Tenant, and in the event of the loss of any keys so furnished, Tenant shall pay to Landlord the cost thereof.

15.    All removals, or the carrying in or out of any safes, freight, furniture, construction material, bulky matter or heavy equipment of any description must take place during the hours which Landlord or its agent may determine from time to time. Landlord reserves the right to prescribe the weight and position of all safes, which must be placed upon two-inch thick plank strips to distribute the weight. The moving of safes, freight, furniture, fixtures, bulky matter or heavy equipment of any kind must be made upon previous notice to the Building Manager and in a manner and at times prescribed by the Building Manager, and the persons employed by Tenant for such work are subject to Landlord’s prior approval. Landlord reserves the right to inspect all safes, freight or other bulky articles to be brought into the Project and to exclude from the Project all safes, freight or other bulky articles which exceed the load bearing capacity of the floors of the Building or which violate any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part.

16.    Tenant shall not purchase janitorial or maintenance or other like service from any company or persons not approved by Landlord. Landlord shall approve a sufficient number of sources of such services to provide Tenant with a reasonable selection, but only in such instances and to such extent as Landlord in its judgment shall consider consistent with security and proper operation of the Project.

 

C-2-2


17.    Landlord shall have the right to prohibit any advertising or business conducted by Tenant referring to the Project which, in Landlord’s opinion, tends to impair the reputation of the Project or its desirability as a first class building for offices and/or commercial services and upon notice from Landlord, Tenant shall refrain from or discontinue such advertising.

18.    Landlord reserves the right to exclude from the Project between the hours of 6:00 p.m. and 8:00 a.m. Monday through Friday, after 1:00 p.m. on Saturdays and at all hours Sundays and legal holidays, all persons who do not present a pass to the Project issued by Landlord. Landlord may furnish passes to Tenant so that Tenant may validate and issue same. Tenant shall safeguard said passes and shall be responsible for all acts of persons in or about the Project who possess a pass issued to Tenant.

19.    Tenant’s vendors and contractors shall, while in the Premises or elsewhere in the Project, be subject to and under the control and direction of the Building Manager (but not as agent or servant of said Building Manager or of Landlord) and, prior to commencing any work, shall be required to maintain and provide copies of such insurance coverage as reasonably approved by Landlord with liability policies naming Landlord and the Indemnitees as additional insureds.

20.    If the Premises is or becomes infested with vermin as a result of the use or any misuse or neglect of the Premises by Tenant, its agents, servants, employees, contractors, visitors or licensees, Tenant shall forthwith at Tenant’s expense cause the same to be exterminated from time to time to the satisfaction of Landlord and shall employ such licensed exterminators as shall be approved in writing in advance by Landlord.

21.    The requirements of Tenant will be attended to only upon application at the office of the Project. Project personnel shall not perform any work or do anything outside of their regular duties unless under special instructions from the office of Landlord.

22.    Canvassing, soliciting and peddling in the Project are prohibited and Tenant shall cooperate to prevent the same.

23.    No water cooler, air conditioning unit or system or other apparatus shall be installed or used by Tenant without the written consent of Landlord.

24.    There shall not be used in any premises, or in the public halls, plaza areas, lobbies, or elsewhere in the Project, either by Tenant, Tenant’s contractors or others, in the delivery or receipt of merchandise, any hand trucks or dollies, except those equipped with rubber tires and sideguards.

25.    Tenant, Tenant’s agents, servants, employees, contractors, licensees, or visitors shall not park any vehicles in any driveways, service entrances, or areas posted “No Parking” and shall comply with any other parking restrictions imposed by Landlord from time to time.

26.    Tenant shall install and maintain, at Tenant’s sole cost and expense, an adequate visibly marked (at all times properly operational) fire extinguisher next to any duplicating or photocopying machine or similar heat producing equipment, which may or may not contain combustible material, in the Premises.

 

C-2-3


27.    Tenant shall keep its window coverings closed during any period of the day when the sun is shining directly on the windows of the Premises.

28.    Tenant shall not use the name of the Project for any purpose other than as the address of the business to be conducted by Tenant in the Premises, nor shall Tenant use any picture of the Project in its advertising, stationery or in any other manner without the prior written permission of Landlord. Landlord expressly reserves the right at any time to change said name without in any manner being liable to Tenant therefor.

29.    Tenant shall not prepare any food nor do any cooking, operate or conduct any restaurant, luncheonette or cafeteria for the sale or service of food or beverages to its employees or to others, except that food and beverage preparation by Tenant’s employees using microwave ovens or coffee makers shall be permitted provided no odors of cooking or other processes emanate from the Premises. Tenant shall not install or permit the installation or use of any vending machine or permit the delivery of any food or beverage to the Premises except by such persons and in such manner as are approved in advance in writing by Landlord.

30.    The Premises shall not be used as an employment agency, a public stenographer or typist, a labor union office, a physician’s or dentist’s office, a dance or music studio, a school, a beauty salon, or barber shop, the business of photographic reproductions or offset printing, a restaurant or bar, an establishment for the sale of confectionery, soda, beverages, sandwiches, ice cream or baked goods, an establishment for preparing, dispensing or consumption of food or beverages of any kind in any manner whatsoever, or news or cigar stand, or a radio, television or recording studio, theatre or exhibition hall, or manufacturing, or the storage or sale of merchandise, goods, services or property of any kind at wholesale, retail or auction, or for lodging, sleeping or for any immoral purposes.

31.    Business machines and mechanical equipment shall be placed and maintained by Tenant at Tenant’s expense in settings sufficient in Landlord’s judgment to absorb and prevent vibration, noise and annoyance. Tenant shall not install any machine or equipment which causes noise, heat, cold or vibration to be transmitted to the structure of the Building in which the Premises are located without Landlord’s prior written consent, which consent may be conditioned on such terms as Landlord may require. Tenant shall not place a load upon any floor of the Premises exceeding the floor load per square foot that such floor was designed to carry and which is allowed by Law.

32.    Tenant shall not bring any Hazardous Materials onto the Premises except for those that are in general commercial use and are incidental to Tenant’s business office operations and only in quantities suitable for immediate use or otherwise in compliance with Hazardous Materials Laws.

33.    Tenant shall not store any vehicle within the parking area. Tenant’s parking rights are limited to the use of parking spaces for short-term parking, of up to twenty-four (24) hours, of vehicles utilized in the normal and regular daily travel to and from the Project. Tenants who wish to park a vehicle for longer than a 24-hour period shall notify the Building Manager for the Project and consent to such long-term parking may be granted for periods up to two (2) weeks. Any motor vehicles parked without the prior written consent of the Building Manager for the Project for longer than a 24-hour period shall be deemed stored in violation of this rule and regulation and shall be towed away and stored at the owner’s expense or disposed of as provided by Law.

 

C-2-4


34.    Smoking is prohibited in the Premises, the Building and all enclosed Common Areas of the Project, including all lobbies, all hallways, all elevators and all lavatories. “Smoking”, as used herein, shall be deemed to include the use of e-cigarettes, smokeless cigarettes and other similar products. All rules and regulations set forth in this Exhibit C applicable to smoking also apply to the use of e-cigarettes, smokeless cigarettes and other similar products.

35.    Tenant shall not store any items within 18 inches of a sprinkler head.

36.    Building ladders including fixed ladders and step ladders are not to be used by Tenant, Tenant’s agents, servants, employees, contractors, licensees or visitors.

37.    Electrical power strips and portable “space heaters” are not permitted.

38.    Tenants are not permitted to open an electrical panel. Tenants are required to contact Landlord to reset a circuit breaker.

39.    Tenant shall reimburse Landlord for the cost (plus an administrative charge at Landlord’s then prevailing rate) of Landlord providing any special services or work requested by Tenant to the extent such services or work are not specifically set forth as a Landlord obligation in the Lease.

 

C-2-5


EXHIBIT D

SNDA

Record and return to:

Principal Real Estate Investors, LLC

801 Grand Avenue

Des Moines, IA 50392-1450

ATTN: Commercial Mortgage Servicing

NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

757713

THIS AGREEMENT (this “Agreement”), made and entered into as of the > day of >, 2020, by and between PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, with an address for purposes of notice at c/o Principal Real Estate Investors, LLC, 801 Grand Avenue, Des Moines, Iowa 50392-1450 (hereinafter called “Lender”) and >, with its principal office at > (hereinafter called “Lessee”);

WITNESSETH:

WHEREAS, Lessee has by a written lease dated >, as amended by > (hereinafter called the “Lease” and the definition of “Lease” shall also include any future amendments or modifications specifically approved in writing by Lender), leased from the landlord named in the Lease (hereinafter called “Lessor”), all or part of certain real estate and improvements thereon located at >, as more particularly described in Exhibit A attached hereto (the “Demised Premises”); and

WHEREAS, Lessor is encumbering (or has previously encumbered) the Demised Premises as security for a loan (the “Loan”) from Lender to Lessor (the “Mortgage”); and

WHEREAS, Lessee and Lender have agreed to the following with respect to their mutual rights and obligations pursuant to the Lease and the Mortgage;

NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) paid by each party to the other and the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto do hereby covenant and agree as follows:

(1)    In the event of any foreclosure of the Mortgage or any conveyance in lieu of foreclosure, provided that the Lessee shall not then be in default beyond any notice, cure or grace period under the Lease and that the Lease shall then be in full force and effect, then Lender shall neither terminate the Lease nor join Lessee in foreclosure proceedings, nor disturb Lessee’s possession, and the Lease shall continue in full force and effect as a direct lease between Lessee and Lender, Lender shall be bound to Lessee under all terms and conditions of the Lease (except as provided in this Agreement), the leasehold estate under the Lease shall not be terminated by Lender during the term (including any extensions or renewals) except in accordance with the terms

 

D-1


and conditions of the Lease, the possession by Lessee of the Demised Premises and Lessee’s rights and privileges thereto shall not be diminished, disturbed, affected or impaired during the term (including any extensions or renewals), nor will the Lease or the term (including any extensions or renewals) be terminated or otherwise adversely affected in each case (i) except as provided in this Agreement, and (ii) otherwise in accordance with the terms, conditions and provisions of the Lease. Lender further agrees not to join Lessee in any foreclosure proceeding except to the extent necessary under applicable law, but such joinder shall not be in derogation of the rights of Lessee as set forth in this Agreement and such joinder shall be for that purpose only, at no cost to Lessee and shall not result in the termination of the Lease.

(2)    After the receipt by Lessee of notice from Lender of any foreclosure of the Mortgage or any conveyance of the Demised Premises in lieu of foreclosure, Lessee will thereafter attorn to and recognize Lender or any purchaser at any foreclosure sale or otherwise as its substitute lessor on the terms and conditions set forth in the Lease. In the event of any foreclosure, Lender shall recognize Lessee as the tenant of the Premises for the remainder of the term of the Lease (as may be extended or renewed) in accordance with the provisions thereof, as the terms of the Lease are modified, amended or supplemented (as approved by Lender).

(3)    Lessee hereby agrees that if Lessee has the right to terminate the Lease or to claim a partial or total eviction, or to abate or reduce rent due to a Lessor default under the Lease, Lessee will not exercise such right until it has given written notice to Lender, and Lender has failed within thirty (30) days after both receipt of such notice and the date when it shall have become entitled to remedy the same, to commence to cure such default and thereafter diligently prosecute such cure to completion within ninety (90) days of Lender’s commencement to cure such default.

(4)    Lessee agrees that if the Lease is terminated pursuant to the terms of the Lease, or otherwise, Lessee will remit any payments made in connection with such termination directly and immediately to Lender.

Lessor hereby agrees that such payments shall be held by Lender as additional security for the Loan and applied at Lender’s sole discretion.

(5)    In no event shall Lender be liable for: (a) the return of any security deposit provided to Lessor under the Lease unless said security deposit is actually received by Lender and then only pursuant to the terms of the Lease; (b) any act or omission of the Lessor; (c) any covenant of Lessor to undertake or complete the initial construction or installation of improvements on the Demised Premises; (d) any sums due Lessee under the Lease related to the costs of preparing, furnishing or moving into the Demised Premises or other premises for relocated or expanded premises as contemplated in the Lease (for example, a construction or tenant improvement allowance); (e) any covenant of Lessor related to restrictive uses or exclusives which pertain to properties outside of the Demised Premises and which Lender could not reasonably comply with if it became Lessor under the Lease or (f) any offsite expansion space as contemplated in the Lease which Lender could not reasonably comply with if it became Lessor under the Lease. Further, Lender shall not be subject to any offsets or deficiencies which Lessee may be entitled to assert against the Lessor as a result of any act or omission of Lessor occurring prior to Lender’s obtaining title to the Demised Premises, it being understood that nothing in this clause shall be deemed to exclude Lender from responsibility for repairs and maintenance required of the Lessor under the Lease

 

D-2


from and after the date Lender takes title to the Demised Premises, whether or not the need for such repairs or maintenance accrued before or after such date; provided, however, that in no event shall Lender be responsible for consequential damages resulting from the failure of Lessor to undertake such repairs and maintenance.

(6)    This Agreement and its terms shall be governed by the laws of the state where the Demised Premises are located and shall be binding upon and inure to the benefit of Lender and Lessee and their respective successors and assigns, including, without limitation, any purchaser at any foreclosure sale or otherwise. This Agreement may not be modified orally or in any manner other than by an agreement, in writing, signed by the parties.

(7)    This Agreement may be executed in counterparts, each of which shall be deemed to be an original, and such counterparts when taken together shall constitute but one agreement.

(Signatures on next page)

 

D-3


IN WITNESS WHEREOF, this Agreement has been fully executed on the day and year first above written.

 

PRINCIPAL LIFE INSURANCE COMPANY,
an Iowa corporation
By:   PRINCIPAL REAL ESTATE INVESTORS, LLC,
  a Delaware limited liability company,
  its authorized signatory
  By  

                    

    Name:
    Title:
  By  

 

    Name:
    Title:
>, Lessee
By  

 

  Name:
  Title:
By  

                    

  Name:
  Title:

 

D-4


STATE OF IOWA          )

                                         )

COUNTY OF POLK      )

On this      day of             ,         , before me, the undersigned, a Notary Public in and for the said State, personally appeared                      and, to me personally known to be the identical persons whose names are subscribed to the foregoing instrument, who being by me duly sworn, did say that they are the and                     , respectively, of PRINCIPAL REAL ESTATE INVESTORS, LLC, a Delaware limited liability company, authorized signatory of PRINCIPAL LIFE INSURANCE COMPANY, an Iowa corporation, and that the instrument was signed on behalf of the corporation by Principal Real Estate Investors, LLC, as authorized signatory of Principal Life Insurance Company, by authority of the Board of Directors of Principal Life Insurance Company; and that the aforesaid individuals each acknowledged the execution of the foregoing instrument to be the voluntary act and deed of Principal Real Estate Investors, LLC, as authorized signatories of said corporation, by it and by them voluntarily executed.

 

 

 

           Notary Public in and for said State
 

My Commission Expires:

[Affix Notarial Stamp or Seal]

 

D-5


Tenant - Please insert Notary Form in place of this page.

 

D-6


Exhibit A

Legal Description will be inserted by Lender prior to closing.

 

D-7


EXHIBIT E

FF&E

 

LOGO

 

E-1


RIDER 1

COMMENCEMENT DATE AGREEMENT

                    , LLC, a                      limited liability company (“Landlord”), and     ,                     , a                      (“Tenant”), have entered into a certain Office/Laboratory Lease dated as of             , 20     (the “Lease”).

WHEREAS, Landlord and Tenant wish to confirm and memorialize the Commencement Date, Temporary Space Expiration Date and Expiration Date of the Lease as provided for in Sections 2.1(b) and 2.2 of the Lease;

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein and in the Lease, Landlord and Tenant agree as follows:

1.    Unless otherwise defined herein, all capitalized terms shall have the same meaning ascribed to them in the Lease.

2.    The Commencement Date (as defined in the Lease) of the Lease is,             , 20    .

3.    The Temporary Space Expiration Date (as defined in the Lease) of the Lease is,             , 20    .

4.    The Expiration Date (as defined in the Lease) of the Lease is             , 20    .

5.    Tenant hereby confirms the following:

(a)    That it has accepted possession of the Premises pursuant to the terms of the Lease; and

(b)    That the Lease is in full force and effect.

6.    Except as expressly modified hereby, all terms and provisions of the Lease are hereby ratified and confirmed and shall remain in full force and effect and binding on the parties hereto.

7.    The Lease and this Commencement Date Agreement contain all of the terms, covenants, conditions and agreements between Landlord and Tenant relating to the subject matter herein. No prior other agreements or understandings pertaining to such matters are valid or of any force and effect.

 

Rider-1


TENANT:      LANDLORD:
                                                                                                      ,                           LLC,
                                                                           a                      limited liability company
By:                                                                                                     By:                                                                                           
Print Name:                                                                                                          Richard K. Robbins
Its:                                                                                                                                       Managing Member
By:                                                                                                     [INSERT CORRECT SIGNATURE
Print Name:                                                                                      BLOCK FOR PROPERTY]
Its:                                                                                                     

 

Rider-2

Exhibit 23.1

When the transaction referred to in note 19C of the notes to the consolidated financial statements has been consummated, we will be in a position to render the following consent.

/s/ KPMG LLP

 

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Berkeley Lights, Inc.:

We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the prospectus.

Our report dated April 17, 2020, except as to Note 19C, which is as of                 , 2020, refers to the Company’s change in its method of accounting for leases effective January 1, 2019, due to the adoption of Accounting Standards Update (ASU) 2016-02, Leases, and the related accounting standard updates.

San Francisco, California

July 13, 2020, except as to Note 19C, which is as of                 , 2020